The Government is ready to help the meat industry consolidate, Agriculture Minister David Carter says.
Merger overtures by Silver Fern Farms to fellow meat co-operative Alliance have been rejected by Alliance's board and Silver Fern is appealing directly to shareholders in advertisements placed in newspapers.
Silver Fern is asking the shareholders of both companies for their views on a joint investigation of the benefits of a merger.
Speaking to Federated Farmers in Wellington yesterday, Mr Carter stopped short of supporting Silver Fern's move, but said there was a role for the Government to help smooth the way for greater consolidation of the industry.
"But unless a groundswell comes from the shareholders there's little we can do to drive it," he said.
The Government had met with meat company representatives to offer its help.
"We've categorically told them, `We want to assist you, tell us what you want us to do'."
Funding help was unlikely but the Government was prepared to look at legislative changes to remove such obstacles as meeting Commerce Commission approval.
"We are prepared to look at something, because we've got to find a way to restore profitability to the industry," Mr Carter said.
"To me, it's a nonsense when you see your products selling for the highest prices ever in England and yet farmers are struggling."
Even if Silver Fern's attempt failed, consolidation was inevitable, but would happen over time. The present structure was established when national flock numbers were 70 million. Now they were at 32m.
He dismissed the view that competition was good for the industry. "Where that competition does not work for you is when the companies fight against each other to get access to supermarkets in Britain and Europe."
Industry consolidation could begin with more co-operation in international markets, he said.
Industry restructuring had been deliberately excluded from a meat industry strategy being worked on by Deloitte for the Meat Industry Association, Beef + Lamb New Zealand, the Agriculture and Forestry Ministry and Trade and Enterprise. "I can't see that it will deliver a credible report unless it touches on structure," Mr Carter said. "I suspect, knowing the person who's doing it, it will."
Deloitte partner Alasdair MacLeod is preparing the strategy.
Mr Carter also showed the farmers a way they could hasten consolidation.
Referring to meat company efforts to get farmers to commit to supply contracts, rather than play companies off against each other in Sunday night auctions, he pointed out that a big part of Fonterra's success was due to the loyalty of its milk suppliers.
"So, is there an opportunity for more loyalty from sheep farmers to an organisation so it knows it's getting a reasonable quantity of lambs to kill?"
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