Farmer anger needs channelling into reform

JON MORGAN
Last updated 10:13 11/04/2013

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OPINION: The meat industry is attempting to rise from its sick bed and walk in the sun once more. But it needs a miracle.

The industry has been poorly for a long time - ever since the intravenous drip of subsidies was yanked out in the mid-80s.

Oh, we all hail the progress made since those days. The withdrawal of subsidies forced farmers to become more cost-conscious, lift genetic quality and improve ewe performance and lamb growth.

It made meat companies compete for supply and upgrade works and working conditions.

And exporters to work harder to meet customer demand and promote a variety of cuts in new markets.

It has made the industry leaner and cleaner. It has also seen an upsurge in science, with new feeds and financial tools for farmers and automation in processing.

But it hasn't made anyone any richer. Sheep and beef farmers aren't going broke, but they're not thriving. Not like their dairying mates.

It varies from district to district, but the average sheep and beef farmer's income for this year - admittedly the drought hasn't helped - is predicted to be $73,000 before tax and mortgage payments.

That mightn't sound too bad to a deskbound townie but these are medium-sized businesses with millions of dollars in assets.

Actually, I suspect that as the drought lingers in key regions, that figure will be a lot lower.

The young men and women who survived the 80s are now downcast and weary. They look around for new, keen youngsters to take up the burden, but they're not there.

So the farmers turn up at meetings bewildered and angry, demanding that something be done.

A meeting at Gore a few weeks ago attracted 1000 and meetings are planned for Christchurch next Wednesday and Feilding on April 26. The organisers hope the anger will drive an unstoppable nationwide movement for change.

The meat companies are the obvious targets. And rightly so. But the farmers should also look at themselves.

It's their behaviour of playing meat companies off against each other that has worsened the situation. But then, the companies are willing participants too.

Everyone's to blame. And it's got so convoluted that someone from outside is needed to step in.

That can only be the Government, which has been hands- off so far.

I've seen a couple of good ideas. One is from food industry commentator Keith Stewart, that it should be compulsory for farmers to contract to meat companies, thus guaranteeing the companies meat supply so they can plan ahead.

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The other is from Feds chief executive Conor English. It's a long shot, but if successful would get the sick man off his bed, out into the sun and jumping for joy.

He proposes a Fonterra-type model based on a nationwide pool for each of the grades of meat.

This would mean farmers receiving the same price whether they sold in December, February, May or September.

As with Fonterra, a price per kilogram for each grade would be announced at the beginning of the season, say $6.50.

This would be reviewed a couple of times during the season. An advance payment would be made of, say, $3.50 a kg and then at the end of the season there would be an under and over wash-up.

"This could work," he says. "It would be a dramatic change for the sector and needs to be more thought through."

I like it. It would provide the certainty that both farmers and processors desperately need.

And he's not kidding when he says it would be a dramatic change. It could not succeed unless the majority of farmers and all meat companies were behind it.

Looking at the industry's turbulent history, it would be a miracle if this occurred. But miracles do happen.

English also joins the popular call for consolidation of the meat companies, at least with a merger of the two co-operatives. But he has another suggestion too.

That is a division of labour - a few companies concentrate on efficient processing while a separate organisation does the marketing.

Once again, these are radical ideas, ones that would need legislative approval.

At this early stage - assuming that the current demand for reform won't fizzle and die like others before it - it would be a big help if the Government gave some guidance.

Indication of a preference for a new scheme would help focus the debate. At the moment, all we're hearing is anger. Sooner, rather later, this has to turn to action.

- © Fairfax NZ News

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