Beef, sheep plan urges better co-operation

Last updated 09:17 05/05/2011
VALUABLE MEAT: The beef and lamb industry is worth $8 billion dollars to the New Zealand economy.

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The $8 billion beef and lamb industry has been told it can add $3.4b to the economy if it follows the recommendations of a new strategy.

The red meat sector strategy, drawn up by a Deloitte team and unveiled at Parliament yesterday, urges greater trust between farmers, processors and exporters.

Deloitte was granted unprecedented access to meat companies' accounts and procedures, interviewed farmers, processors and others in the industry, received more than 500 farmer replies from an online survey and held meetings around the country.

The strategy says the current price boom in lamb, beef and wool will not last without greater transparency within the industry.

It talks of the need to "rebalance incentives and practices to remove any one sector participant's ability to profit at the expense of another" and says building greater trust will bring a "self- sustaining change process".

It says companies are being held back by having to compete simultaneously in two areas - stock procurement and export markets. But it rejects the long- held view that the answer lies in meat company mergers and plant closures, saying "their direct benefits are not as significant as other sector opportunities".

Instead, it calls for collaboration between normally competitive rivals to tackle a market. Such an approach could be used in current markets when demand exceeds the biggest exporter's ability to supply and could also be used to develop new markets.

The strategy also urges greater synergies in procurement of stock for processing, particularly transport, which would help companies manage seasonal peaks better.

If co-operation can be achieved, Deloitte foresees the creation of Fonterra-type auctions setting international prices for commodity products such as manufacturing beef, non-prime lamb cuts, tallow and offal. This could be a central point for companies to come together and sell to customers.

It could provide a reliable price floor to ensure different products achieved higher prices and could be a place where companies could obtain extra supply.

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