Amalgamation unlikely but stock shortage certain

Just what does the poll result on meat industry amalgamation really mean? A response rate that low will put into question the validity of the results but farmers are notorious for being apathetic in voting.

With so much bad blood between the two companies over the years, Alliance's reponse is not surprising. But for all the politicing, what hasn't changed is a large shortfall of lambs and ewes to kill this season.

Stock losses are now being reported in both islands and appear to be one million plus, the size of a medium plants capacity.

Both companies are vunerable to this lack of stock and will at some stage need to rationalise this overcapacity.Also what hasn't changed is the lack of profitability of the sheep and beef sector, and until this industry can work together for all parties to benefit, farmers will be forced to chase more profitable landuse options.

The poll of Silver Fern Farms and Alliance Group shareholders, initiated through an open letter to farmers over the past two weeks, attracted a low response. A total of 517 shareholders responded with 87% indicating they supported Silver Fern Farms and Alliance in appointing an independent facilitator to chair a joint evaluation committee to: · create a strategic plan for the future of New Zealand meat products and by products;· agree on the appropriate governance structure to support that strategic plan;· oversee the independent analysis of the financial outcomes of an amalgamation of the two companies; and· publish a report on these matters to be distributed to shareholders, excluding confidential and commercially sensitive details.

Silver Fern Farms’ Chairman Eoin Garden says the low response was not surprising, as farmers are traditionally apathetic when it comes to voting. “However, the poll did face an aggressive push back by Alliance Group – who were opposed to even the suggestion of evaluating the amalgamation benefits – and that would have contributed to the low turnout.” “That said, farmers now have clarity as to Alliance Group’s position towards industry aggregation and in particular with another industry co-operative – that is, Silver Fern Farms.”

Mr Garden acknowledges that Alliance Group will put industry aggregation on the agenda at its forthcoming Annual Meeting. “But, based on its board’s overly aggressive and negative reaction to the suggestion of an independent evaluation, we don’t expect the world to change.” On the other hand, Silver Fern Farms’ shareholders now have clarity, which enables the board and management to focus on its own strategy, and to use its strong equity base (70% as at September 2010) to improve profitability for both the business and for its farmer suppliers.”

And now the North Island hill country is now reporting big lambing losses.

Some farmers in the hill-country are facing deficits as a result of the September storms that wiped out many newborn lambs, says farm adviser Gary Massicks, of Stantiall and Keeling, based in Feilding. He said most farmers in the hill-country lambed through September, as this was usually a milder month than August, and lamb survival and feed were there for ewes. "Overall, estimates are that NZ-wide, we lost at least one million lambs in September. That equates to one major meat plant."

Ewes were scanned in the hill-country and most showed about 130 per cent lambing. but the loss of lambs in the storm meant many docked only 90 to 100 per cent, he said. Mr Massicks said the upside was that many hill-country farmers who had fewer lambs could finish them themselves, rather than selling them as store (unfinished) lambs reports the Manawtu Standard. "That will help the farm budget. But it means there will be few lambs around for the farms that specialise in taking store lambs and finishing them. I don't know what they're going to do." Mr Massicks is expecting fewer lambs to be around, which he said would create something of a price conflict between meat processors.