Merino model winning support
Reporter Penny Wardle talks to Marlborough merino farmers, who ask not to be named, about their hopes for a venture marketing their merino meat at premium prices. Can Silere Alpine Origin Merino succeed in a volatile sheepmeat market, she asks, and who carries the risk if it fails? ....
Marlborough farmers who signed contracts with Silere Alpine Origin Merino three years ago say the programme is paying off at a time of shocking prices, and they hope it can survive in a falling market.
New Zealand Merino Co business development manager Wayne Cameron said Silere would offer new contracts to existing growers, then to other growers, but would not say when.
The meat was selling well in key international markets and more than 90 Kiwi restaurants, he said.
Regardless of the success of Silere, Silver Fern Farms would continue to take contracted stock, Mr Cameron said. This was because Alpine Origin Merino was a sales and marketing unit, while NZ Merino handled procurement, supported by staff from Silver Fern, which was the contractor.
Silver Fern chief executive Keith Cooper said the planned rollout showed all parties were comfortable with where they were sitting. China, Hong Kong and the United States were placing orders and new markets were being developed.
Silver Fern producer group manager Simon Eddington said 90 South Island high-country farmers, including six from Marlborough, sold lambs to Silere, a joint venture between NZ Merino and Silver Fern aimed at testing high-end markets for merino meat and using as much of the animal as possible.
Foundation contracts opened in April 2011 and closed in February 2012, attracting an average of 170,000 stock a year for the three years of the contract.
One Marlborough farmer told the Marlborough Express that, done right, the contracts could set a good example for the sheepmeat industry. They provided certainty of income for farmers, certainty of supply for the company and an example of a company pushing boundaries and doing new things.
"But [both] farmers and the meat company have to believe the deal is benefiting them."
Starting at about $6.80 a kilogram, Silere set monthly prices for the first year then made annual adjustments, he said. In October, the market lifted and Silere paid new entrants about $7.80/kg, keeping faith with original suppliers by paying them the same amount retrospectively.
When a new contract came out in November last year, many farmers turned up their noses at the $5.80/kg offered, which in retrospect looked attractive, the farmer said. In late January, Silere announced plans to release new contracts in March, with preference given to loyal suppliers.
In January, farmers who signed up at the start of the programme were paid $6.95/kg for qualifying hoggets over 16.5kg, then worth about $4.70/kg on the open market.
"My information is the price we're being paid is way above the schedule and will be even further," a farmer said.
However, once a 4 per cent market innovation and investment levy was deducted on all lambs and ewes, returns did not look so good, he said. This year the works was paying $40-$50 for ewes which last year were worth $110, and the levy added up to a significant sum.
Meat from the ewes is used in merino burgers sold under the Hellers brand at New World supermarkets.
Mr Eddington said growers in the programme had definitely earned prices above the spot market this season.
"However, the philosophy behind the Alpine Origin Merino programme is not about a premium over the spot market but . . . providing a degree of certainty in farming with livestock prices at the levels required to farm profitably and plan ahead with confidence," he said. "This is a build-and-think model."
Steve Satterthwaite, of Muller Station, said Marlborough farmers were the first in New Zealand to brand and market merino meat, so were keen to see Silere succeed. Silere involved many farmers over a wide geographic spread so had a good chance of success, he said.
Silere Alpine Origin Merino Offers farmers who sell all their wool to the NZ Merino Company three-year contracts to supply merinos for meat.
Originally required 100 per cent of stock to be contracted but later reduced this to 50 per cent.
Has twice offered short-term contracts to fill gaps during times of low supply.
Will buy sheep with at least 50 per cent merino genetics at up to 18 months old.
Gives farmers the option of fixed prices set at the beginning of the contract, the schedule price or a mix.
Kills contracted merinos at Silver Fern Farms' Fairton and Pareora plants.
Aims to use as much of the animal as possible, marketed throughout the year.
The Marlborough Express