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Allan Barber sees a growing difference of opinion on the best strategy to get the red meat industry restructured

Allan Barber sees a growing difference of opinion on the best strategy to get the red meat industry restructured

By Allan Barber

It hasn’t taken long for the cracks to appear in the ‘united farmers for change’ movement started by the Meat Industry Excellence group which held its first meeting in Gore a couple of weeks ago with a resoundingly successful response.

The next meeting organised by MIE will be held in Christchurch this Wednesday Friday, but without Gerry Eckhoff who chaired the Gore meeting but has resigned over a disagreement with the strategy.

Having said on the National programme the morning after the meeting that the new system and structure could be in place by next season at the beginning of October, he is now saying this is completely unrealistic.

I told you so, Gerry!

His main problem with his former committee members is that they insist on engaging with the meat companies before they have a mandate from farmers throughout the country.

Meanwhile ex Meat Board director John McCarthy also says he doesn’t agree with MIE’s approach, although he broadly shares their objectives.

However he is organising a North Island farmer meeting in Feilding on 26 April which Gerry Eckhoff will chair.

McCarthy’s view is that they shouldn’t be chatting amicably to the meat companies who symbolise the present system which has let farmers down.

With all due respect to McCarthy and Eckhoff, I can’t see how on earth they think they can change the system without the cooperation and assistance of the meat companies.

It won’t make a blind bit of difference to gain a mandate from one or even several meetings in the North Island, if they don’t find out what the companies are thinking.

The other thing that beggars belief is that these two champions of the downtrodden peasant farmers actually believe it’s all the fault of the meat companies.

Haven’t they read the Red Meat Sector Strategy?

This clearly lays the responsibility for the solutions at the feet of all the participants in the industry.

To refresh the memory, the recommendations of the RMSS were to achieve coordinated in market behaviour, aligned procurement and sector best practice. All these require cooperation between farmer and processor/exporter.

Without guaranteed timing and quality of livestock supply, the exporters will have trouble meeting customer demands and will inevitably have product surpluses or shortfalls. Procurement alignment could be solved by contractual supply agreements; while best practice would enable farmers to supply to specification most of the time, provided they know what the market wants.

None of this is rocket science, but a drought year like this one makes it difficult to achieve a perfect supply pattern. However a mutual relationship of trust between farmer and meat company would make it much easier to manage.

Conversely a season with plenty of grass like last year puts the farmer in the driving seat which explains why the lamb prices stayed too high for too long.

It seems that farmers decided last year’s lamb prices were what they needed and deserved to be paid, despite the fact the meat companies lost more than $200 million.

However this year’s prices are completely uneconomic and the industry’s structure is to blame.

There’s a case for arguing that the meat companies should have kept the price down last year, so they could pay a higher price this year. But the Commerce Commission might have had something to say about that and, of course, nobody knew this would be a drought year.

My reading of what MIE is seeking is that it understands the realities of the industry and would like to work with the meat companies to develop a workable strategy for future improvements.

Messrs McCarthy and Eckhoff appear more idealistic and reckon they can reach Utopia by demanding concessions from the companies. I wish them luck.

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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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4 Comments

"Who speaks for farmers"?
 
How about 'The National Party'? Or 'Federated Farmers'? Maybe 'The Business Roundtable', perhaps? Then there's the deputy PM, Bill English, farmer, and brother of Federated Farmers president.
NZ farmers are easily the best represented and defended group this country has ever known.

I remember the author of the Deloittes Red Meat Sector Strategy  (Alasdair McLeod) saying that most farmers said that  leadership was missing in the sector ... but he then said he honestly wasn't sure what sort of leadership was required. 
 It seems to me that having a clear vision for the industry and shared commitment from all parties is critical as well as a transformational leader that perhaps comes from outside the current hierarchy due to all the distrust issues.  The meat companies spend a great deal of energy wooing farmers when they should be truely consumer focused.
All good in theory though... bloody hard in practice.
 
 

You state,

"Conversely a season with plenty of grass like last year puts the farmer in the driving seat which explains why the lamb prices stayed too high for too long."

I disagree Alan, that the farmers were to blame for last years demise of sheep meat losses and put all that responsibility on the meat companies. Farmers can only respond to the market and price signals offered by the meat processors as they look to utilise their grass in the most profitable way. They have many options and will choose what they percieve is the most profitable.
We need to remember last year in the south, southern processors purchased hundreds of thousands of store lambs during this period of surplus feed along with farmers, as they endeavoured to make profits out of the growthy season. This decision in hindsight was poor and they like many farmers lost a considerable amount during this venture as their last years losses reveal.
The fault lies with the companies not listening to the overseas market and responding quickly enough. A past CEO of a large meat company once said the only way to encourage farmers to supply in a growthy season "is to put the schedule down" and respond they will.
I do agree with your view to find a solution to this industries problems requires an "industry approach" and Eckhoff and McCarthys " us verse them" system is the failed direction this industry has been going down for years.

I think the whole point is that there is a need for a complete change of culture across the board. Farmers need to understand that we need to supply our stock in a commited and orderly manner(as much as possible within a biological system) and meat companies need to treat us in a more equal and transparent fashion.Everyone working in a co ordinated fashion with an eye on the big picture not price on the day.How long will it take for us to work out that the status quo is not a good system!A more efficiant procurement enviroment and a more co ordinated in market statergy will deliver considerably better returns to the farmgate. 
 
 I agree that old political hacks like Eckhoff and McCarthy are the last people we need leading this process of change. They exemplify the them vs us culture that holds this industry that has a potentially bright future back. I applaud the farmers who are driving this and support their stratergy. My Canterbury mates tell me there will be a big turnout tommorrow at Wigram for the ChCh meeting.