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Allan Barber says meat companies must address industry inefficiencies if farmers vote to spend their money on collaboration programme. Your view?

Allan Barber says meat companies must address industry inefficiencies if farmers vote to spend their money on collaboration programme. Your view?
Mike Petersen, Chairman, Beef+Lamb NZ

By Allan Barber

The collaboration for sustainable growth project to be half funded by farmers, industry and others and half by the government’s PGP programme must now wait until the votes have been counted.

Voting closed last Friday, and Beef & Lamb NZ’s proposal to spend $19.8 million of farmers’ money including Meat Board reserves, hinges on a yes vote by its levy payers.

B&LNZ has held a number of meetings throughout the country leading up to the AGM in Wanaka on Friday in a concerted effort to explain the benefits to its levy payers of the project.

There have been some good meetings with lots of questions and I would have thought the majority of farmers will have accepted the proposition; after all it’s not often the government hands out half the cost of such a programme, while meat companies, two banks and an accounting consultancy firm contribute 20%.

Farmers are being asked to approve spending 30% of their money which has already been built up in reserves over many years.

So they are not being asked to put their hands in their pockets, just spend some of what has already been put aside.

There is some debate about the undue influence of large corporate farmers and meat companies on the voting process which appears to reflect opinion from farmers not in favour of spending reserves and levy funds in this way. However this may only be a sideshow, because the main questions are coming from farmers who want to see progress on the two other strands of the Red Meat Sector Strategy - coordinated in-market behaviour and aligned procurement – before farmer money is spent on the project directed at lifting on farm performance.

In his speech to B&LNZ’s annual meeting, chairman Mike Petersen argued that the collaboration programme will be an important part of the organisation’s continued evolution and will facilitate the future growth of the farming sector.

He made the point that there was a need for farming to continue to lift its productivity performance at the pace of the last 20 years, but B&LNZ would need to continue to evolve and improve to help bring this to reality.

Petersen went on to say that meat companies needed to communicate better about market gains, but above all there had to be a change in the procurement methods.

He emphasised that it was B&LNZ’s business to get involved in this conversation, because decisions about change to procurement are entirely up to farmer suppliers and shareholders of the meat companies.

In concluding he said “there is an elephant in the room".

A simple merger of the two cooperatives as suggested by many is in my view not enough, but today I am calling on companies to address this area once and for all.

Farmers are increasingly demanding change away from the status quo. We have been told that even if there is not one dollar for farmers for a period of time after an industry reorganisation, they need to see some options on the table to give them confidence for the future.

If we do nothing, nothing will change. And that is the very point of all of the work I have talked about today. If you are happy with today’s profits, then do nothing.”

In spite of Mike Petersen’s plea, it’s hard to see where the appetite for change to the present system will come from.

Company shareholding structures are firmly fixed, at least for the time being, but the present drought may prove to be the catalyst for change.

Livestock volumes to slaughter which are plentiful in the North Island because of lack of feed will inevitably take years to rebuild.

We can’t keep having a big ewe cull in years when there is no drought, followed by a drought induced cull, without serious, even permanent, damage to the sheep flock. The beef herd may also be affected, while dairy herds may take a battering, but will undoubtedly recover in due course.

However sheep farmers are looking for some sure signs that their industry has a future which doesn’t always seem to be the case, especially when the price of lambs falls by nearly 50% in a year.

They want and deserve more than to be told their reserves will be spent on teaching them how to be more efficient and productive, while the seemingly never ending problems of procurement and market competition persist.

Mike Petersen was quite right to remind meat companies that they have to play their part in telling the story better and working with farmers to drive the improvements in procurement and the marketplace.

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Here are some links for updated prices for
lamb
beef
deer
wool

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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or read his blog here »

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26 Comments

There have been some good meetings with lots of questions and I would have thought the majority of farmers will have accepted the proposition; after all it’s not often the government hands out half the cost of such a programme, while meat companies, two banks and an accounting consultancy firm contribute 20%
 
Yep, all good when the Government extends a financial helping hand to boost the economic growth and sustainability of one of New Zealand’s primary food sectors.
 
And yet the Prime Minister, apparently, failed to see the importance of attending the funeral of Hugo Chavez, the deceased leader of New Zealand's second largest dairy export market in the world last year. Read article
 
According to the Ministry of Foreign Affairs and Trade website, Venezuela was New Zealand's second largest dairy export market in the world last year.
 
Even so, New Zealand does not have so much as an honorary consul in Venezuela, which imported $433 million of our goods last year. That amount far exceeds the other countries on Key's Latin America trip: Mexico $280m, Chile $77m, Brazil $81m, and Colombia bringing up the rear, with a tiny $13m sliver of our annual trade.
 
Last week however, Key announced his desire to open a New Zealand embassy in South America, and to locate it in Bogota, Colombia - despite Colombia being, on those current trade figures, among the smallest of our markets in South America.
 
Robert Muldoon once famously declared that for us, diplomacy is trade. If so, and if we are serious about fostering trade with South America, we need to adjust to diplomatic reality.

they just skirt the real issues. They have not a clue what to do, they just fiddle and tweak. We have restructured, reduced capacity, reduced numbers, merged, and bankrupcied, all have failed to help, what could they do next that would actually help?
Insted thay have their eye on farmers savings via the old meat board, there are alot of people drawing very nice salaries in  beef and lamb and they want the gravey to keep coming.
 
 Farming problems are
 
1.  debt
 
2. Costs
 
3  beef and lamb
 
 The fist requires land prices to drop and indebted farmers to leave the industry allowing young farmers to get started in farming, bringing with them enthusiasm and new ideas. Not something our bankers or indebted farmers want to hear, or Beef and Lamb
 The second, needs to find out why farm costs increase above the rate of inflation and have done for years, requires huge cuts in council budgets and some taxes and a rethink of the way business is done in NZ.
 How can we compete when our costs are above our trading partners, can we really expect to keep a 500 mil export market to Venezuela, when they can grow their own milk so much cheaper, as Chile is doing with a little help from Fonterra.
  Low cost commodity producers do fine, high cost ones not so good, all risk and stuff all profit.
 
 The government is here to help
“New Zealand currently produces almost four times as much milk per cow than is produced in Colombia, which is why they want to tap into our skills and expertise
"Colombia has the land and New Zealand has the expertise," says Mr Guy.
This follows the announcement by the Prime Minister that New Zealand would commit $4 million to develop a cooperation project to improve the production, trade and businesses of Colombian small-scale milk producers.
 
http://whymedellin.com/en/why-readings/news/on-demand/706-the-business-o...
 

There is certainly a need for a complete sort out for the entire industry. At the moment it is in a slow death spiral.
 
The Beef and Lamb PGP is an expensive nonsense. They have provided next too no detail as too what it exactly entails. SFF's farmIQ has taken up the meaty(pun unintended) bits, leaving B&L too conjur up a bit of financial benchmarking and pretend that a range of vested interest service providers are going to miraculously follow B&Ls decree too standardise on farm advice.Cockooland stuff! I cant believe the govt has backed it except for it allows them to deflect critisism that they aren't doing anything. Productivity gains in sheep and beef farming are already in excess of other industries despite loss of our best land to dairy. These gains will continue as the majority of farmers are constantly striving to improve as it is and those tools already exist.
 
Rationaliseing of the processing sector, changed farmer behavior as to how we supply(yes im talking to you, sunday night auction exponents!) and a far greater emphasis on marketing are the keys to turning this puppy around.

Shagger, your produtivity gains will level off, but your costs wont.
Still lots of Aussie lamb in Californian supermarkets at  $4. 50 a lb.  The problem is, marketing can solve some of our problems, but harder if our products are expensive and their are other producers. When costs are so obviuosly distorted then why not deal with them?
A lot of people in NZ are happy to be very well paid when the country simply cannot afford them, J Key is happy to borow to fill the gap, I say dump them. You only have to look at the Solid Energy management or any other major company to spot the overpaid.
If it doesn't get dealt with then production will fall as we move to lower cost systems. Eventually we get to face the music, I'd just rather not get to watch the IMF strip us bare, doing their job for the 'gods of money'.

Sheep shagger, are you going to the meeting in Gore next week?  Do you believe it has the potential to change attitudes?

Hi CO, I will be there.I told Stevie here a couple of weeks back that things were brewing behind the scenes and this is the first manifestation of it. There is a huge groundswell of dissatisfaction and everyone realises that things have to change. Thats farmers attitudes as well as company structures. Whats that old saying about if you do what you always do, you get...
 
If there is a big turnout next Monday at Gore it will be the catylist to get wider action going.I know there are groups everywhere looking to get going, it just needs a spark.This could get interesting!
 
 

Yep SS, I saw your comment to stevie and figured there would be a southern initiative coming on. ;-)
 
Good luck to you all - I wish you all well.

Thanks CO, we need to learn from our more cohesive dairy cousins!
 
This needs to start in the South as we hold the majority of the co op's shares. If we cant sort our sh%t out then its dead in the water before it begins. 

we need to learn from our more cohesive dairy cousins!  What do you mean SS? Do you think the sheep and beef sector should take a lead from Fonterras restructuring of the cooperative?

Hey Omnologo - how's the feed situation down on your place?  Are you on 16/18hr milking?
Did you attend the Fonterra sustainability meeting?  I would be interested to hear what you thought and what the mood of the meeting was.

SS, make sure you ask Landcorp CEO Chris Kelly how they intend to help lead this . Will they stop asking for special deals and splitting their lambs between 4 companies. No weasle words!!

Better still Stevie, come along and ask him yourself!

 
Shagged sheep
This is not a game you can win, its a rigged market.
For all we can see that is wrong, most of the problems are unseen. The biggest problem, which while its always been a problem just nothing like what it is today, is debt. I don't mean just farm debt I mean debt in general. The amount of money in the economy that is captured by the finance sector is climbing every year, all the rest of us are getting poorer and that includes farmers. There is a giant transfer of wealth happening under our very noses and we keep voting for it.
 
The money makers used to be producers now its the FIRE sector and in NZ some importers, who must be making fortunes, going by how much dearer some things are in NZ than the USA.
 
Beef and lamb is after our savings, and they will take them, and waste them, the money will go on consultants, marketers, management, ego trips and fees. They will do this because, a. they don't understand the problem, which is a declining standard of living in the western world and, b. they are doing very nicely, thank you suckers.
 
This is caused partly by an energy crisis but mostly by debt. Up to %40 of the cost of everything you buy is the interest component and its growing. Look who's buying farms, used to be farmers who started off shearing, fencing and contracting, now its foreign corporates wanting to diversify, those in the finance sector, bank backed large scale heavily indebted farmers and rich people wanting some where quiet. Look at some of the names in the dairy industry, Hart, Fay, Landcorp, Chinese dairy farmers, etc. Some Austrian woman, owns a ton of land in Gisborne, I heard as much as 160,000 stk units. This is who you compete against when you want to expand or buy some stock.
 
We are on the short and slippery slope, the end of family farms, unable to compete with the selling power of Landcorp, et al. This problem is not going away, its going to get worse, John Key has already said that the future of farming in NZ will be a lot more corporates.
Fonterra is doomed. Not a good model to follow.
 
I support you in your fight, but first we need to inform farmers about the problem, its potential to ruin their lives, and then we need to fight at the voting booth. Its the only place you are going to win this battle.
People Like Keith Cooper are in the hands of our, 'dear leaders and bankers'.
 
You will not win this by restructuring, you will make it worse, as more capital is transferred from our savings and equity, as Beef and lamb is doing, into the parasitic finance sector. They employ PR firms to lie for them, even the HB Regional council spends 800k+ a year on a PR firm so they can become better at mis-truths.
 
As long as farmers keep voting the same way for the same people with the same old thinking they are supporting the status quo, its like saying, 'yes please rape me, make it rough, then strangle me',thank you, would you like a cigarette, does that feel better.

Well put AJ.

Aj - I agree with the thrust of your argument but don't agree in your solution - that a change in govt  will make a difference.  All parties are like headless chooks running to or from the largest noise, depending on whether it is a welcoming noise or a scary noise. Because they are headless, what they can't see is that there is a quiet groundswell of discontent that is rising.  They can't see the revolution is building.
 
I see farmers in two camps - those who are 'genuine' farmers and those who aren't.  The genuine farmers are the sheep shaggers of this world - they don't leave the industry or lease their farms - they are in it for the long haul. They put up with crap for only so long and then put a peg in the ground and say - now we fight back. The French underclass were told they were fighting a fight they couldn't win, but there was still a revolution which it could be said, they won. 
 
I believe that we will, in time, see a face off in the dairy industry between 'genuine' farmers and the syndicated corporates over compliance issues.  Already I hear of farmers talking among themselves about what they see to be the more generous treatment of syndicated farms by the regional council.  If the syndicates cry poor, the perception is that they get away with things that individually owned farms don't.  Having said that there are some well run corporate and sydicated farms, but there are also some who have quite simply run out of money to do the necessary environmental work.
 
You are correct about PR spin.  Fonterra is a master of mixed messages, or perhaps they really don't know themselves some times.  The China farm strategy is one example: CEO says that Fonterra is "underwater financially" on the China farms, and they are "the cost of doing business there". Then we are told the strategy in China is to drive dividend up and support milk price in NZ. But it is also about helping secure our free trade agreement (I thought that was already done). It helps us to grow our branded position - but we don't manufacture over there - all the milk is sold to third parties!  Nevermind the PR company is so good at spin it convinced Fonterra to sign them up for another 5 years!! :-(
 

I don't think a change in government will solve our problems, but I do think  change will have to come from how we vote, at present I don't see a party able to help but I like think that situation could change.
I used to be a genuine farmer and when I sold, I only sold to try and get a bit bigger, now I feel shut out of the industry, while it goes from one disaster to the next. I had a little too much debt for comfort, and very high cost farms, so I decided I needed to take the bull by the horns, a lucky break.
Revolution, hopefully it wont come to that but its where our present path is leading us.
 

Change to the status quo almost never eminates out of government, rather almost always out of civil society.  The question therefore is how 'civil' the actions needed to effect that change might be and whether NZ will break first, or whether our civil action will follow when all hell breaks loose in the US. 
 
The current trajectory we are on in NZ I think stems from the Brash era - and the symbollic action from civil society that signalled the end for that ideological framework was the mud slinger at the Waitangi Day celebrations.  Just like the shoe thrower where George Bush was concerned.
 
Sure, neither Brash nor the ideology went away, but neither did it gain any renewed momentum. Both sides of the current lot haven't got any guiding principles - they are in a moral and intellectual no man's land.  Key looks to me to be a puppet of the US - Shearer likely would be as well.  Who then is going to be prepared to break ranks - to untangle us from the arms of the squid - who will tell the 'Goldman Sachs' of this world to get the hell out of our country?
 
I'm tired of the excuse that NZ is but a cork bobbing around in the ocean of globalization. I'm ready for a revolution as soon as I spot whomever that leader of it is.     

The money makers used to be producers now its the FIRE sector and in NZ some importers, who must be making fortunes, going by how much dearer some things are in NZ than the USA.
 
Importers intend to further gouge locals. Read Article
 
Businesses say they plan to raise prices on imported goods despite the strength of the New Zealand dollar giving them scope for price-cutting.
 
That's according to the latest ASB Kiwi Dollar Barometer, a quarterly measure which tracks exporters' and importers' foreign exchange risk.
 
The survey found that while 60.3 per cent of importers planned to increase hiring and 62.2 per cent planned to lift investment due to the high kiwi, three out of every five said they planned to lift prices as well.
 
The pricing intentions run counter to the typical scenario where a stronger currency reduces the cost of imported goods. The bank noted higher importer margins had also been observed in a similar survey in Australia.
 
Laissez - faire preference for pillaging the economy needs to be terminated.

Terminated - it's a good word.

Can't make it sorry SS. Thats why I'm asking you. Hope it goes well. 

Give me a break, Mr kelly gets paid waht? 700k a year to behave the way he does. You calling him a weasel, will not worry him. And when the meeting is over, watch the farmers hang around him all waiting for a photo oportunity.   oh boy, are we gonna get screwed.

Exactly AJ!!.

Stevie, I think that is why he's relevant given that he and his outfit are seen as part of the problem. He's paid the big bucks to deliver a divy to the govt so plays the game accordingly. That doesnt mean he believes industry structure is ideal and infact I know that he doesnt. If someone who is seen to benifit from the system questions it then that is a good starting point. Its not about trying to squeeze an extra 20cents per kg here or there from the existing system its about getting the extra $2per kg that we could extract from working together. 
 
Aj.This is about making changes to the things we can affect. You may well be right regarding the bigger monetary picture but short of you waving your magic wand from the beach in California and making debt disappear and costs shrink it is no more than intellectual talking points on a blog site. I for one will be at Gore to lend my support to getting some meaningful change underway.

You will end up running into belief systems that will fight you tooth and nail.
Good luck with that.  Sometimes things are clearer from a distance.

Oh dear!!!!  Major controversy arising at the Kumeu show :-)
 
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10870638

I guess Peters will be a shoe in next election - "The best laid schemes of mice and men / Often go awry", no?