Positive outlook for meat industry

July 14, 2008

ANZCO Foods chairman Graeme Harrison is confident that the meat industry has a positive future.

He said the industry is not broke and farmers should take a “level headed” approach to its future – because it does have a good future. 

ANZCO, a 24-year-old private company, is the fourth biggest player in the New Zealand sheepmeat market and the second biggest in the beef and veal markets.

It has in the last three years invested $125 million in new plants and upgrades and in food manufacturing expansion, says Harrison, a significant individual shareholder.

“We wouldn’t be making these investments if we didn’t think there was a good future for the business.”

By way of example Harrison says ANZCO has only recorded one loss in its 24 year history – in 1998 – “because of an investment outside New Zealand”.

“I’m sick and tired of all the negative publicity about where the meat industry is…. I’ve got confidence so producers should be taking a very level-headed view of this (debate) instead of being carried away with all the negative publicity.”

When prices are low, costs are rising and balance sheets in the red, it is easy to become pessamistic but I agree that the industry has a bright future.

Harrison says this was the message he gave a recent gathering of producers for ANZCO’s CMP business and he wants to repeat it to all meat growers as they debate the future of their industry.

“The problem sector in the meat industry is lamb and it’s in the South Island because of competition for land use (dairying).

” We have an industry with four players, all with about the same financial strength. Forget about sales turnover and market share … what you actually have is declining livestock numbers and supply is the key to this business. Where companies are similarly resourced clearly you are going to have severe competition. The long and the short of it is, some fallout is going to occur. What we have is livestock supply eroding in sheepmeat at a rate we haven’t seen since the mid-1980s. So clearly there is going to be change.”

Harrison says market forces are at work and farmers are responding to them. The biggest market force is the dairy boom.

“It’s the biggest boom in New Zealand agriculture since the early 1950s.(when dairying converted to sheep, particularly in mid-Canterbury and Southland). We’ve got a reverse of that now but on a bigger scale. Good mixed farming areas are going into dairying and the reason is comparative profitability.

“There’s nothing new about this…but extraordinary things happen in those environments. I’ve been trying to make the point that the meat industry is not broke. There’s been far too much talk about this, though it is true that financial rewards have been poor in the last four years.

“Sooner or later when you have poor returns there will be an effort to rationalise.”

If we still had subsidies we’d probably still have 60 million sheep and a mountain of lamb and mutton deteriorating in freezers. Instead we now have fewer than 40 million sheep and farmers are looking at their options and making rational business decisions based on the markets. Some are persuaded by dairy returns to convert their farms to dairying or dairy support. Others who don’t want to do that are looking at the positive impact dairy prices are having on their own land and selling.  Some still belive there is a future in sheep and beef, which of course there is.

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