Anger at meat companies' lamb prices

JON MORGAN
Last updated 05:00 07/03/2013

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OPINION: As racehorses were thundering along Castlepoint beach on Saturday, spraying sea water and sand in their wake, small groups of farmers were huddled together, deep in conversation.

It was a scene repeated at many rural events in recent weeks. They were talking about the weather and the perfidy of meat companies.

Usually, talking is all they can do. But lately they have had an opportunity to vent their frustrations.

The trouble is, a $65 million industry-wide plan to lift their income is now at risk.

It is a seven-year project to improve farmers' business management and will have funding from the Government, six meat companies, two banks, a corporate adviser and Beef + Lamb New Zealand.

Over the past few weeks, farmers have been voting whether to commit their share - $19.7m from Meat Board reserves. The votes will be counted at Beef + Lamb's annual meeting at Wanaka tomorrow.

If the farmers don't approve, the scheme won't go ahead.

Such is the anti-company feeling this is a real possibility. "Why should we trust them with our money when they show no sympathy for us," one farmer told me.

The protracted dry weather afflicting the North Island has made matters worse, though there's a feeling that might soon change.

Farmers know it's no use getting angry about the weather, but they are fired up about the big four meat companies. And with good reason. The companies are paying about half of what they were a year ago for lambs.

One Wairarapa farmer told me he is being offered $4.25 a kilogram for his lambs - a price that does not cover his costs. He estimates some of his bigger neighbours are down $200,000-$300,000 in income compared with last year.

Of course, last year was a cracker - a rare combination of perfect farming weather and high product prices.

But it is now clear those prices did not accurately reflect the market. The companies allowed themselves to get carried away with initial high prices and didn't react quickly enough when British and European markets pushed back.

They took prices down slowly, with no company prepared to give their rivals a chance to gain at their expense. So, for eight weeks the prices for lambs did not accurately reflect what customers were prepared to pay for the meat half a world away.

This season began with prices more accurately reflecting the market, but have continued to drop as the dry has set in and farmers have flooded the works with lambs to relieve feed pressure on the farm.

This is not unusual. It is the old law of supply and demand kicking in. But farmers don't like it. They think the meat companies have dropped prices too far and are trying to claw back the losses of last year - conservatively estimated to be $120m to $150m.

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This is what was exercising the farmers at Castlepoint and elsewhere. Their anger has been fuelled by Silver Fern Farms' sentiment that farmers were to blame for last year's unrealistic prices because they kept their stock on the farm for too long. Silver Fern says this caused a shortage and forced the companies to lift prices to entice sales.

Farmers don't believe this and say that, actually, by holding onto their lambs they were doing the companies a favour by not flooding the market as prices were coming down.

Whatever, for farmers to vote down the chance to be involved in a scheme that promises a permanent lift in their income just so they can cock a snook at the meat companies would be foolish.

It would also do lasting damage to their own organisation, Beef + Lamb, which has worked hard to win unprecedented industry-wide support for the scheme.

It would be another nail in Beef + Lamb's coffin, following up the vote of four years ago when farmers voted not to fund wool research.

The organisation came close then to being voted out of existence and reacted with a big restructuring that now focuses on keeping more closely in touch with farmers' needs.

But nothing could have prepared it for the situation it now finds itself in. A vote against this latest scheme will have it again on shaky ground.

- © Fairfax NZ News

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