SFF comfortable with MIE influence
Meat processor Silver Fern Farms (SFF) is comfortable with the influence of the Meat Industry Excellence (MIE) reform group on its board, says chairman Rob Hewett.
Former MIE leaders stood successfully as farmer-elected directors on the boards of SFF and rival co-operative Alliance last year in an effort to increase industry profitability, bring the co- operatives closer together and encourage farmers to supply livestock to them.
Gaining a seat on the Alliance board was Gore farmer Don Morrison, while Richard Young from Gore and Dan Jex-Blake from Gisborne won the nod of shareholders to join the SFF board.
Hewett said SFF had welcomed the two former MIE leaders at their first board meeting this month.
"Our aspirations for the industry aren't that different from MIE and I have been on record saying that almost from MIE being in existence. Co-ops exist to allow lots of small producers to band together to get the benefit of their volume. ... I'm firmly of the view that farmers need to own their value chain well up to the processing end anyway because that allows the value creation to capture the wealth."
Hewett said he agreed with Young's claim that if farmers did not own the supply chain they would become peasants on their own farm.
"If we don't own the processing then we have abdicated the right to that profit as farmers and what that means is someone like (multinational food processing company) JBS could come in here and buy the plant and buy the meat from farmers as cheaply as they can and sell for as much as they can and basically we will get just as much revenue to come back next year."
He said the co-operative model worked well for farmers and was accepted in New Zealand with 50 per cent of the sheep business in co-operatives and more in dairy co- operatives.
Australian dairy farmers did not have a co-operative relationship as strong as New Zealand and were less happy about their milk payments than Kiwis, he said.
Last week, Alliance chairman Murray Taggart said consolidation was a good thing as long as it stacked up and MIE's principles were not far from Alliance's own.
SFF has tightened its books since making a loss of $28.6 million after tax for the year ending September 2013 from total revenue of $2 billion following a $31.1m loss the previous year. A two-year programme has worked through the after-effects of a 201 1/2012 sheepmeat market spike and collapse which has since levelled off.
Part of its programme has been a new eating-quality grading system for beef and a branded range will be introduced to supermarkets next month. Top- eating beef is being separated, branded, packaged and sold to higher-paying customers.
Hewett said SFF was working to put the losses behind it and would have put more investment into its branded strategy and consumer led products if cutting costs had not been a priority.
"We have had two terrible years really and we have got some pretty exacting targets we have got to meet.
"We are focusing on that and it does mean with our branded strategy I would love to do more. So we have these exacting targets we have to make this year and we have set them as a board and we are on target and tracking nicely."
He said SFF was trying to invest for the future as well as dealing with company issues and there were wider issues for the red meat industry to solve.
"There is (meat plant) over capacity. Many commentators would say the industry model isn't broken, well it is. We wouldn't be right in a consumer cycle if it wasn't. There is too much capacity in the sheep meat sector and it's a matter of how that gets dealt to.
"It's an industry problem .... because nobody is running at full capacity all the time."
Despite declining sheep numbers and changing land use there were encouraging signs.
The global financial crisis still affecting the European Union was slowly coming right and the United States market showed signs of turning a corner.
Europe continued to be a valuable market for New Zealand as it took value-added chilled cuts and a lamb carcass of about 18kg to 19kg as opposed to carcasses of 20kg in a six-way cut sought after by China.
The growth rate for product demand from China had been "phenomenal" and was expected to take higher value cuts on top of large demand for lower value cuts.
China's middle class had a love affair with brands and this was expected to carry over to branded meat and its own sheep flock was declining as it became more urbanised.