By Tony Chaston
Is that it? Ditch all the independent stock agents and all the meat sector woes will disappear. I don't think so.
Questions must be asked why farmers are using all these agents, ahead of the processors procurement people in the first place.
Lack of trust and transparency by processors to treat and communicate with them fairly are the root cause of the issue.
Secret deals, an "us and them" mentality even from companies owned by the very shareholders they were meant to serve, has soured many farmers and they looked to independent agents to source a fair deal.
An industry approach is the only way to heal the wounds but with the two Co-Operatives still miles apart there appears little hope of that being achieved.
Attitudes have improved significantly over the last 5 years , but will this report be just another cost of consultants to the industry, or will it ignite real change?
Jon Morgan also shares his concerns that present high prices will hide the real issues that need to be faced, if the red meat sector is to survive.
Sheep and beef farmers ditching stock agents and supplying meat processors directly could reap up to $100 million in earnings in the first year, according to the architect of a new sector strategy reports Stuff.
Deloitte partner Alasdair MacLeod, who has been leading the work on the red-meat sector strategy, presented initial findings to about 100 fa rmers and industry representatives at a meeting in Gore yesterday, the first of 11 planned throughout New Zealand.
The research showed farmers wanted meat companies to carry out more collaboration in marketing, but they also wanted a procurement process that gave them the best price. "I'm telling you now, you can't have both and have a sustainable future."
The sector needed to become more market-led, while there was an opportunity to improve profitability without any further investment by taking advantage of existing scientific knowledge and technology to lift on-farm productivity.
Piloting in-market collaboration and increasing automation in meat plants, which was already under way, could bring benefits of up to $190m in the third year, he said.Throughout the initial stage of research, it had been made clear the "threats" to the industry from competing land use including dairy and forestry were "very real", Mr MacLeod said.
Dairy was more of a threat than he had assumed, with new grass cultivars predicted to move into areas drier than those normally considered for dairy land, he said.
The aim of the meeting was to road test the initial findings, before the completion of a final report, due in late March. During the past four months about 50 farmers had been interviewed, along with a further 50 people from various organisations, including meat processors and government agencies. while 542 online surveys had been completed.
26 Comments
The problem is uniteing sheep and beef farmers is like herding cats. We are not an industry but 12000 seperate SMEs. Unfortuately many dont see past the farmgate. Thats where I think the companies need to show some leadership. Third party players wouldnt operate if it wasnt for the implicit support of the companies. Chicken and egg stuff I guess.
The treats are very real. Dairy, dairy support, forestry and increasingly arable options will be being looked at by many in lieu of flock rebuilding. I hope this report gains some traction and is a catylist for meaningful change, but im not holding my breath!
Picture this: Farmer Jim has several farms and a bit of clout at Fonterra, so when he rings up and says what are ya payin for my milk Henry? Henry says Aw seeing you send us so much milk Jim we will pay you $8.00/kg.
Farmer Johnboy who has one farm, phs Henry at the beginning of the season and asks what he's going to be paid... Aw Johnboy youre just a peewee, we will pay you $7.00/kg
Now what would happen if this was Landcorp and average Joe Blow, what would the dairy farmer scream....blue murder...yet this is what happens to the sheep and beef farmer. Are we suckers or what?
Far too simple.
In this case we have an industry with unsatisfied demand for its product at already high prices. However it suffers from high fixed overheads due to overcapacity/ inefficencies in the supply chain. There is a danger that if we shrink too much we risk losing critical mass and therefore our ability to supply markets all year around and therefore lose shelf space.
We are stuggling to provide enough work for the existing service workers like meat workers and shearers. R and D money/ scientists and skilled workers would gravitate to other areas. The enviroment would be under more pressure from increased dairy conversions etc.
There is too much opportunity and too much to lose just to wave the white flag!
Bill Falconer said in the Dom Post article " you can't force people to work together if they don't like each other" refering to the different bosses of meat companies. Falconer is wrong. I agree with Morgan, you can force collaboration. The EU lamb quota is allocated by Meat Board on behalf of Govt. Solution allocate equal EU quota to the respective companies for a season. The following year when it is time for further allocation assess which company has performed the best in terms of return to the farm gate and the top performing company wins a greater allocation. Be surprised at how that will make them sharpen their pencils. Just an idea.
We only used 86% of our quota last year, so I dont think that would be a very big stick these days. Infact I dont believe in market competition is at all an issue now. Alliance stated a week or two back that it had orders for three times as much as it could supply.
Unfortunately the best short term solution is for further capacity reduction to match reduced supply. I suspect that will be market forced as opposed to collaboration.
I agree with SS, it is hard to compare doctors and lawyers with sheep farmers.
If you need to see a doctor or a lawyer, then it is just that, a need.
If you don't see a doctor you get sicker, if you don't buy lamb you just buy chicken instead, there is not the tolerence for price rises as seen in services where failing to address the problem can cause pain/ cost.
Yes LG, I think Colin is too busy trying to be clever without contributing any actual solutions to the debate.
The exciting thing is, that if we actually did get this right the average sheep farmer could enjoy returns that would make the average dentist green with envy.
Nice thought, at present, or at least in the past most people I know are farming because its a great way to live, good for family etc, strictly speaking cashflows beg for more answers to the profitability question.
On farm a lot of people can only do so much, the problem lies in the type of people that want to be farmers, the majority really don't want to have to be charging about with placards demanding change.
They just want to farm and get paid a decent price for what they produce.
It may be that the days of being able to do this are limited, now more than ever your are a business person first, farmer second, protester or activist somewhere in the middle.
Nicely summed up LG.
I suspect the real problem is an ageing sheep farmer demograghic. Alot of in the comfort zone operators ticking along happy to deal with their regular drafter/ woolbuyer/ stock agent, not alot of debt, kids not interested. I hear anacdotaly that the wool co op around here had far more support from the younger guys than the older ones, and perhaps i'll be the same in 20 years. Perhaps we just need some blinding good fortune and have afew thumping years to excite and enable the next generation to come through. Abit chicken and egg stuff I know.
Don't know to many s&b farmers in a comfort zone. 70% of s&b farmers haven't made aprofit the last 4 years and 70% of those won't make a profit this fianancial year, figures from a farm consultant group. There are about 18,000 sheep and beef farmers so work it out.
The average age of s&b farmer 59. so why haven't young people entered into pastoral farming? They have seen their parents slave for sfa ( I know some of you will say you are doing very well) If you have a hill country store block costs and lack of returns etc etc all take a toll.
I still think that if the quota is allocated based on best returns, the meat companies will soon get the message to pull finger.The total consumption of lamb and goat meat ( the two get lumped together)is just over 3% out of all the meat protein consumed worldwide. NZ and Aust don't even register in the top 25 exporting companies.So while in the scheme of things we are small fish, the industry is important to NZ economy and everyone really needs to get on the same page.
Janette,your quota suggestion would make it very difficult for companies to maintain long term relationships with their customers and provide a disincentive to sign up any forward pricing incase the market moved in the interim leaving the company high and dry without quota the next season. And as stated above since we were only able to fill 86% of quota last year and with a couple of million less lambs around this year its probably not an issue for the forseeable future anyhow.
Also dont underestimate our potential market clout. We are 75% of traded sheepmeat with Aussie about 15% and daylight third.
As for the stat indicating 70% of s and b farmers have made a loss in each of the last 4 years, I simply dont believe it. Not on a nationwide scale anyway, perhaps in areas effected by successive droughts. To suggest that the majority will make a loss this year also doesnt compute. Sold some works ewes for $105 this week, $51 last year. If cockies cant make ends meet at that there is some serious issues not necessarily related to the market.
Sheepshagger same consultant said that 20% of his clients are under severe bank pressure and about 40% being monitored. I don't say things that aren't correct. Cockies that have debt are struggling more than you think. The market has only lifted past 2-3 months yet to see if it will be sustainable I think things are still pretty volatile even Fonterra don't feel confident to state clearly that prices are guaranteed they still think the market is volatile
What I suggest about quota allocation would be the incentive for companies to change their marketing strategies to ensure that they have committed sales and therefore able to do forward pricing.It will be based on performance.Everyone has to start thinking differently if they want to have successful businesses. I don't underestimate our clout .The demand for mutton isn't the usual currently and I understand the demand is India and Russia it could be just a one off.
I agree with ss - amending the quota no longer will have the same effect as perhaps in years gone by solely due to the fact that the lower global sheepmeat production has meant nz meat companies can cherry pick markets more than they have been able to in the recent past and they dont have to rely on (to the same degree) the European retailers to sell huge volumes of lamb. however, i would doubt the cherry picking extends to shipping mutton to india as we cant actually do that due to the trade restrictions imposed. i would imagine the markets which have increased demand for mutton are the same markets where australia has recently pulled out of due to lack of mutton supply.
I believe if we get back to producing quality stock and product in this environment we will be successful. The product will sell itself. NZ lamb and wool has deteriated in past decades. However ther is still quality product out there and those guys with this product will be successful in the coming years. I cannot believe we still don't teach our young farmers what a well structured animal is - that has the meat in the right areas for the best quality and quantity of product the consumer desires!!!. I did a four year degree in the nineties, and am not sure much has changed for the better - I'm just now finding out this information.
I believe we need to do business with those we trust. Trust is not a word valued enough in western business - we will be worse than the middle east soon if our values keep going the way they are. We need to work together to do this we need trust and a common goal not all these indsividual goals - me me me.
There are great opportunities for someone to step into the stock agent business and shake the system up: more respect for the client/farmer: more respect for an efficient system of getting animal from breeder to slaughter; and a fee system based on time worked on a deal as opposed to a percentage of stock sale - earn your keep. Maybe harder to administer I don't know.
Agents and works should be linking like minded farmers up to ensure quality stock has minimal setbacks from birth to slaughter - maximum efficiency. Thats the mission - if successful everyone will be rewarded. When these links are used the agent should get a fee for time spent setting up the deal (not a percentage of stock sold) we want efficiency those that put the time in and make things happen get paid better.
Basically find those parrticipants where a system like this works for you. Politics and parasites may be too big in any industry for this to work for everybody. Deal with those you most trust and who hold decent values with a similar goal for the industry. Farmers, agents and works alike need to look at the big picture - we want to get the product from breeder to consumer in the most efficient and prefitable way. There will always be a place for those that can link store buyer and seller but lets make it more efficient do whats best for the product. Make it happen.
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