Anzco: Dairying meat farmers' big rival

JON MORGAN
Last updated 05:00 19/04/2013

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Farmers pointing the finger at meat companies over poor returns this season are blaming the wrong people, Anzco Foods chairman Sir Graeme Harrison says.

Hundreds of farmers have turned up to meetings in the South Island to voice their anger at low lamb prices.

At Christchurch this week, they agreed to a five-step plan to get farmers to commit the stock to a company and to investigate industry rationalisation.

The focus will switch to the North Island next week with a meeting at Feilding on Friday.

Harrison said the farmers were not looking at the long-term trend.

"The reality is the big change has been because of poor returns from wool."

Meat returns had actually grown.

US dollar prices for beef were close to record levels, let down only by the exchange rate.

Lamb was a luxury product, closer to the top of its retail market than any other New Zealand product.

Thirty years earlier, lamb pricing sat well below beef and on a level with pork but now it was above beef and well above pork.

"We haven't been asleep at the wheel," Harrison said. "The reality is the industry has transformed itself."

Compared with 20 years ago, virtually no carcasses were being sold. "Now we've got a high chilled component and everything goes out in fabricated form."

Farmers had to recognise their real competition was from dairying, he said. With a huge rise in demand from China predicted, this would not go away.

"Land prices have gone up and sheep and beef farmers are rightly wondering how they are going to survive. But it is true land-use competition, as it was back in the 50s and 60s when dairy farming lost out to sheep farming."

Sheep farming would continue to struggle until wool returns improved, he said.

Anzco earlier reported a $19 million after-tax loss for the latest September year, less than rivals Silver Fern Farms and Alliance.

But Harrison preferred to talk about cashflow, pointing out that Alliance and Silver Fern had negative cashflows of $163m and $105m respectively while Anzco was in the black by $35m.

He said the firm saw last season's lamb price crash coming well before anyone else, "so we managed our cash in a way none of the others managed to do".

"We reduced our livestock inventories and took a deliberate view on costs."

This season, he was positive about getting the business back on track. Crucial to this was getting high-value lamb cuts back on to "white tablecloth" menus after they lost their place when lamb priced itself off the market last season.

"What farmers don't seem to want to listen to is it is a very hard job to get on to the menu and easy to lose it. And that has happened in Europe and the United States."

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He said it was a matter of winning back confidence "but we're in an environment where consumer demand is slow for all luxuries, and lamb is a luxury".

- © Fairfax NZ News

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