'Consolidation good for meat industry'
The Meat Industry Excellence (MIE) reform group's drive to have a consolidated and more prosperous red meat industry is not far from the principles of meat processor and exporter Alliance Group, says chairman Murray Taggart.
He said Alliance supported the idea farmers should supply stock to farmer-owned co-operatives and the concept of meat companies working together in marketing and other areas where it was commercially viable.
"We think consolidation is a good thing as long as it stacks up."
Alliance has a "track record" of working with other meat companies such as the New Zealand Lamb Company joint venture to market lamb to the United States and a similar venture in Japan as well as the Ovine Automation project to develop robotics for meat processing.
To step up pressure for reform in the red meat industry MIE has encouraged former leaders of the group to stand as farmer-elected directors on the boards of Alliance and rival company Silver Fern Farms (SFF). This was successful with three reform group-linked farmers gaining seats on both boards last year. Gore farmer Don Morrison was elected on to the Alliance board and Richard Young from Gore and Dan Jex-Blake from Gisborne to the SFF board.
Taggart said every shareholder had the right to vote for which farmer-elected director they wanted on the board.
"Any shareholder has the right to nominate shareholders for the board. We don't have a problem with that. That is democracy and that is the beauty of the co- operative as opposed to the other companies."
However, there was a need for some stability as there had been five changes for nine director positions the last three years, he said.
Taggart said MIE wanted to change meat returns relative to dairy returns and to sort out the plant overcapacity problem, but they were difficult issues and would need more than a few new directors to solve.
Alliance knew the status quo was unacceptable and was not standing still. The co- operative had one of the strongest balance sheets in the industry and was building new packaged brands built around meat quality and developing new markets, he said.
Taggart said the co- operative had the strongest debt to equity ratio of processing companies publishing their results, allowing it to develop its business more than other firms.
Despite this progress Alliance would be unable to deliver the $8.30/kg price for lamb that every farmer wanted or make sheep and beef farming more competitive than dairying, but the gap could be closing. Dairying seemed to be moving closer to wearing the true cost of its water needs, environmental and nutrient responsibilities and this could "tilt the playing field" back in favour of sheep and beef farming, he said.
Developing Chinese middle classes buying more milk products could be expected to eat more red meat in the next few years.
An encouraging sign was that the Middle East was paying more for some meat cuts than China and a financially healthy United States and Europe would lift meat returns further by increasing demand - rising only slowly at this stage - for expensive cuts.