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Allan Barber reviews the history of the redmeat processing industry which shows both farmers and processors have made tremendous progress

Rural News
Allan Barber reviews the history of the redmeat processing industry which shows both farmers and processors have made tremendous progress
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By Allan Barber

It is sometimes tempting to think nothing much has changed with meat exports in recent years when you read all the publicity about the problems in the meat industry.

Since the beginning of this century the contrast with the dairy industry has been particularly marked, but suddenly this season the positions have been reversed.

Sheep and beef farmers can hold their heads high again and it seems likely this state of affairs may even persist for longer than just this season.

MIE has been waging its campaign for meat industry reform based on the premise the industry is inefficient at procurement, processing and marketing with farmer ownership of the value chain the only solution. There is a degree of truth in the theory of inefficiency in all parts of the chain, but no certainty farmer ownership would cure it.

However that is a topic for another day. The industry’s efficiency has improved by several hundred percent since the Meat Board got out of product acquisition at the end of the 1970s and the processing part of the industry was delicensed in 1981.

During the first half of the 1970s the Meat Board controlled all plant licenses and published the lamb and beef schedules.

If the Board thought the companies’ schedules were too low, it published its own and in January 1975 it paid $7 per lamb for 3.6 million lambs before the market price lifted and exporters started buying again. However it lost $4.5 million buying the whole mutton kill. Bear in mind it was farmers’ levy money that was lost.

The 70s were a time of massive change, both social and economic. Britain joined the Common Market, inflation was rampant largely because of the first oil shock, women joined the workforce in greater numbers, supermarkets were taking an increasing share of expenditure on food, microwave ovens were readily available and cheap poultry competed with red meat.

Coupled with these developments shoppers were looking for attractively presented portions of lean meat which meant the decline of the high street butcher and demand for bigger, leaner carcases for cutting. The trade’s total reliance on processing and shipping lamb carcases was a thing of the past.

The largest processors had strenuously resisted industry delicensing because the lack of new competition gave them the opportunity to apply a cost plus pricing method; farmers had to pay the going rate to get their stock killed, usually with a delay at the peak. However the consent to build new plants solved the problem of not enough capacity and, with lower numbers after the removal of subsidies, older plants came under pressure to remain competitive.

This resulted in substantial rationalisation of ownership, but not a great deal of old capacity being removed until the late 80s and early 90s, culminating in Weddel’s collapse in 1994. Since then there have been no significant company receiverships or ownership changes, but plant configurations and capacities have altered enormously, as all operators have sought greater efficiency and reduced cost structures. This has also happened against a background of decreasing livestock numbers, particularly lambs.

During the same period overseas marketing and processing to meet changing market demands have undergone an even greater sea change. It wasn’t until little over 40 years ago that New Zealand exporters set up their own agents or sales offices in the UK instead of selling to the New Zealand offices of British owned companies. The Vestey owned Dewhurst butchers’ chain, supplied by a meat company in the same ownership, was a typical outlet for our lamb.

In 1975 Alliance, AFFCO and Hawkes Bay Farmers formed Associated NZ Farmers located round the corner from Smithfield to market sheepmeat on their collective behalf, although NZF has been in 100% Alliance ownership since 1999. Other meat exporters also owned their own UK based subsidiaries, such as PPCS owned Brooks of Norwich, since closed.

The main development in the last 25 years has been the growth of cuts as opposed to carcase sales, and a rising proportion of chilled lamb cuts within the total EU quota, negotiated at the time of Britain’s entry into the then Common Market. Direct sales to retailers, mainly supermarkets, have been an important component of this trend.

The increase in the sale of cuts, as well as chilled lamb, has been accompanied by the introduction of many more boning and cutting rooms in New Zealand meat plants. At the same time each supermarket chain has contracted intermediate packing plants in the UK and EU to further process primals into consumer ready packs. The highest profile example of New Zealand’s cutting capabilities is the Silver Fern Farms retail range sold through Tesco, although other exporters have also introduced their consumer ready packs in various markets.

The impact on export revenues has been substantial in spite of the 50% fall in the number of lambs slaughtered since the peak because of an increase in lamb weights and a dramatic lift in the price obtained. Costs have increased, but the farm gate return has also risen from $7 in 1975 (or $31 adjusted for inflation) to today’s $100. It is also worth remembering subsidies made up nearly 40% of a sheep and beef farm’s gross income, when the Lange government removed subsidies in 1986.

When so much talk is about poor returns because of an inefficient industry, an examination of the history suggests both farmers and processors have made tremendous progress towards a more prosperous future.

The competitive approach has not always led to the best outcome, but the meat industry is a consequence of the grass driven nature of its production base.

Ownership structures, whether cooperative or corporate, won’t make any difference to that.


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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 or read his blog here ». This article was first publsihed in the Farmers Weekly. It is here with permission.

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Allan I beg to differ on the "Tremendous progress"

It's an old adage but a solid fundamental socio-economic (aka economic) progress is:

Delivering a higher profit

Without a drop in quality

While paying better wages

And without lifting the end ticket price. 

That is the definition of financial success, and the core factors involved.

But!  we're seeing lower profit margins, frequently lower food value, less effective wages to fewer people, and a substantially higher shelf price (I thought mince was bad when it went over $5/kg for best VFI product).

Significant failings on all 4 KPI's, including rising agricultural debt.  0/4 isn't considered a good sign in most annual performance reviews.