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As the MIE meetings push ahead, the gritty issues of commitment, loyalty and trust remain to be addressed and accepted, especially by non-attendees

As the MIE meetings push ahead, the gritty issues of commitment, loyalty and trust remain to be addressed and accepted, especially by non-attendees
Alliance's Owen Poole at a MIE meeting

By Allan Barber

The MIE organised farmer meeting in Feilding on Friday was attended by about 700 farmers which one speaker from the floor compared unfavourably with 2,000 at the Drought Shout.

However there is obviously an increasing level of support for substantial change to the meat industry’s operating method which results in volatile market returns.

Alliance and Silver Fern Farms were both represented and the respective chairmen, Owen Poole and Eoin Garden, spoke in support of the group’s aims.

Poole told the meeting the industry was working constructively to develop an improved model which was simpler than MIE’s plan and it was important to ensure the two plans were complementary.

He said the industry’s plan should provide a platform for further reform and a decision on whether to go ahead could be expected within two months.

While both cooperatives are willing to turn up to the MIE meetings and commit their support, ANZCO and AFFCO’s position is not clear, so it will be interesting to see what sort of industry plan emerges from the discussions.

Garden reiterated the determination to reward farmer loyalty, but said 100% commitment had to be the bottom line, because commitment was bankable.

Companies could be transparent if they had commitment.

This is where I see the real danger to the success of the campaign, because there is nothing to compel either total farmer commitment to their chosen processor or the processor’s absolute transparency on prices paid to suppliers.

The obvious risks are that only a proportion of supply will be 100% committed, as is the case at present, while meat processors will find themselves seriously disadvantaged if they don’t compete for livestock to fill a shortfall.

The committed farmers may only represent less than half the sheep and beef farmers in the country; after all the meetings will not attract more than a quarter of them at best, so it’s quite possible there is still a majority out there that prefers to play the field.

This majority will quite correctly say none of the companies has ever stuck consistently to the principle of rewarding loyal suppliers as opposed to paying higher procurement prices to spot market suppliers or traders.

Mike Petersen, Chairman of Beef & Lamb New Zealand, has picked up on my piece on interest.co.nz in late March which raised the question of Tradable Slaughter Rights (TSR), first recommended in 1985 by Pappas Carter.

His April Chairman’s Update has gone unreservedly for this concept as the answer to the industry’s problems because, as he writes, “this proposal delivers meaningful change and – importantly – the behavioural change required to get this industry functioning better for all participants.”

My understanding is that the meat companies involved in discussions about a new industry model have certainly considered the TSR concept, although there will undoubtedly be some variation to the Pappas Carter model.

TSRs only address the question of processing capacity, not the issues of market behaviour and seasonal supply commitments, but they would provide both some breathing space for the industry and a platform for a new model to emerge.

In the meantime livestock numbers would be allowed to find their appropriate level and companies could assess their appetite for continuing as they are or deciding they would like to expand or shrink their business.

The first step is for farmers and companies to develop complementary strategies they can both live with, so that they can learn mutual trust. Only then will they be able to move forward together instead of blaming each other for their problems.

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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

Your and Beef + Lamb repeat of the 1985 suggestion of tradable slaughter rights may be part of a potential solution, but in isolation it is not a solution. It feels like Beef +Lamb still think they are the old Meat Producers board of old and think imposing quotas is the way forward. Remember last time this ’farmer good’” organisation interfered in the commercial world back in the ‘80’s – they lost $2 billion trading (not marketing meat), they set up and gave away ANZCO and also Bernard Mathews; all using levy payers’ funds.
 
Any reform must embrace the marketplace; address the capital shortage in the sector, address farmer ownership (or not) of red meat processing and marketing companies in addition to creating certainty of livestock supply, plant rationalisation and company aggregation.
 
Reform cannot be a political football as it is rapidly becoming. It is not the domain of Beef+Lamb as a ‘farmer good’ organisation as they only have visibility inside the farm gate. They do not have the visibility of all the issues, neither do they have relationships with the stakeholders. The solution must be comprehensive, not piecemeal. It must be enduring and sustainable and most importantly – value creating. Part of the solution must also be about the relevance of the current CLA levy, and how we address the need to create a true red meat industry organisation that embraces farmers, processors, exporters, marketers and the customer interface. It seems archaic in this day and age to be maintaining a compulsory donation model to an organisation that then spends, with no commercial accountability. 

Keith, Im encouraged that you desire a "comprehensive" solution. The danger here is we miss the opportunity for some meaningful remodeling of our industry with a stop gap measure like TSRs. I think we are all looking forward to the outcome of "serious, serious, serious talks" as Eion Garden said at the ChCh MIE meeting. The option of doing nothing is not a feasible one given the lamb kill will almost certainly be well down next year. We need to manage this situation proactively before the brown stuff hits the fan.
 
Im a little amused at the comment of not wanting this to become a political football and then launching a tirade against Mike Petersen and Beef and Lamb. I dont think any of that stuff is all that helpfu,we are all in this together. That said it is refreshing to see you engaged in the debate as Owen Poole and Eion Garden have been as well. I hope the private companies are also playing ball as they are not immune to the fallout from next seasons pending procurement war.

SS, agree with your point on TSR's. If this in any way protects the statusquo I want nothing to do with it. Interesting Mike Peterson says Beef and Lambs mandate is behind the farmgate and here he is playing politics himself. MIEG must be steeling his thunder of late. Keith has a point SS. B&L are fast becoming an irrelevant organisation. Do you need them to teach you to farm profitably?. The latest policy of trying to drag the bottom 20% of farmers up the ladder to add millions is flawed. You have to want to climb the ladder and theirs many reasons some farmers won't so stop flogging a dead horse.

Stevie,I agree the PGP is a waste of everyones money. Its main purpose is to make B&L and the govt look relevant and involved. SFF took all the meaty(excuse the pun)bits out with their farmIQ. I think you'll find Mike Petersen made his comments as personal ones not with his B&L hat on but it smacks to me of him having some inside as to what the company negotiations are and pre empting them to make himself appear to be taking a leadership role. As you say B&L and the feds have been upstaged by MIE who are essentially as I understand it a group of regular farmers funding this themselves. However all this is squabbling is unhelpful we need to get a workable outcome out of all of this or there is real trouble brewing.