Sheep industry in farmers’ hands

Alliance Group chair Owen Poole suggested a mega-merger of 80% of meat companies several years ago.

That idea was scuttled by Silver Fern Farms.

The 80% model has resurfaced as one of six principles put forward by the Meat Industry Excellence Group which attracted hundreds of farmers to a meeting in Gore yesterday .

• Up to 80% of red meat processed and marketed by one ”coalition of the willing” structure.
• Identify and extract best personnel and strategies. Contracting of stock to specification; need to commit to a company.
• Legislation required to support new structure be sought.
• All participants to fund restructuring.
• Suppliers to be treated fairly, equally and with full transparency.

This time both major companies appear to be supportive.

However, they are also aware of the costs and challenges:

. . . Alliance Group chairman Owen Poole said there was not a meat processor or exporter in the country that did not think a better model should be employed.

Alliance Group and Silver Fern Farms had been talking for some time about that prospect and were still in discussions. One of the group’s principles was for up to 80% of the red meat processed and marketed by one ”coalition of the willing” structure.

Silver Fern Farms chairman Eoin Garden said that was a ”huge challenge”.

”Look how the dairy industry is fragmented because all of a sudden when you get a major player … Federated Farmers or farming leaders get up and say we need another player in the industry to keep the big fellow honest,” Mr Garden said. . .

Merging the two big co-operatives could be a first step but it would be a very expensive one:

Mr Poole warned a merger of the co-operatives would mean they would bear the burden of the amalgamation costs. There were significant costs in that, which should be shared across the industry, whether you were a co-operative supplier or non co-operative supplier. He estimated it at between $250 million and $300 million and asked co-operative suppliers if they wanted to ”pick that up on your own”.

He urged those present to be careful with the process and to ”get it right”.

The biggest challenge is to get all farmers on one page.

Farmers always want a better price than their neighbours and what they say they want for the industry and what they do in their own operations are often very different.

There is too much capacity but how much is enough?

What would be happening now if farmers having to cull their flocks because of drought couldn’t get killing space and what would that do to the already low prices they’re receiving?

Who’s willing to pay the very high costs of plant closures?

The answers are in farmers’ hands – all could now choose to sign up each season to supply one or other of the co-operatives and if most did the smaller companies would be squeezed out of the market.

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