Wider focus needed to save meat industry

BLAIR GALLAGHER
Last updated 13:18 04/04/2014

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OPINION: Meat Industry Excellence (MIE) has clearly been criticised recently for being too dairy-focused with often meaningless comparisons, and it needs to change, otherwise the industry is doomed.

Firstly, MIE is a lobby group working incredibly hard on behalf of all suppliers of product to the red-meat industry. Its focus is to influence the reform of the red-meat sector by promoting economies of scale, and to consolidate at both the procurement end and also in the market place.

Procurement tension between processors and supply volatility continue to dominate pricing, rather than clear and consistent market signals.

Although, MIE is a single voice providing leadership, we have been immensely encouraged  recently by the large level of support from farmers supporting our Beef + Lamb funding remit.

In addition, we had strong public endorsements from Primary Industries Minister Nathan Guy and Federated Farmers president Bruce Wills acknowledging that clearly MIE has a real part eto play in driving the much sought-after change.

Mike Petersen offered positive support during his final address as chairman at Beef + Lamb's annual meeting in Feilding, suggesting that should MIE's remit for funding be successful (which it was by a resounding 61.5 per cent), then he would expect the incoming chair and the new board to endorse and support the wishes of its farmer members.

In addition, Damien O'Connor is continuing in his unwavering support for MIE. There is still an element of "last man standing" mentality, with too many personalities, egos and self-interest in the industry.

The New Zealand meat industry is recognised internationally as a world leader in producing high-quality meat products, but, unfortunately, farmers and processors have faced inadequate and variable profitability for years.

In the past 10 years, New Zealand beef and sheep farmers have outperformed every other sector (including dairy) in productivity gains, so there are some very good things happening in the industry, mostly behind the farm gate.

When Fonterra was formed 12 years ago, the milkpowder price farmers received was about 50 per cent of the United Kingdom and European market price.

Through a consolidated entity with scale and critical mass with a fully integrated supply chain, this year, Fonterra with unsubsidised product is ahead of UK and European pricing.

You only have to look across the Tasman to a dairy industry that hasn't addressed the structural issues to see poor profitability right throughout the sector. In fact, Fonterra is processing more and more Australian milk to the direct benefit of its New Zealand shareholders.

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When we compare this to the red-meat industry, New Zealand farmers receive only 45 per cent of the Irish and Dutch price for lamb, 54 per cent of the UK price and the French receive 80-90 per cent more than we do.

Clearly this is because we have too many players, not only competing in procurement but also in the market place. New Zealand is becoming too reliant on dairy, not only economically but also environmentally, and risks the position  of having ''too many eggs in one basket''.

The world is crying out for protein and, sadly, New Zealand sheep, beef and venison farmers are not capturing the real gains to be had through a consolidated entity of scale, co-ordination of procurement and the market.

Status quo is not working, and there is a crisis in our industry with too many players competing for a diminishing amount of product, too many farmers changing their land uses to stay afloat and a focus on behind the farmgate strategies to fix problems that are clearly in the procurement and marketing areas.

These fundamental issues require remedial and immediate attention.

- Blair Gallagher is on the executive team of Meat Industry Excellence.

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