Call for consolidation in industry with too much capacity

TAMLYN STEWART
Last updated 08:36 13/12/2012

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Silver Fern Farms (SFF) shareholders want the meat firm to show leadership in the industry to avoid the last financial year's poor results.

At SFF's annual meeting in Winton yesterday shareholders asked if any industry aggregation would occur and encouraged the co- operative's board to show leadership in considering options in the sector.

SFF chief executive Keith Cooper said SFF did not have any specific plans, but would participate in any industry reform or aggregation although equally that needed participation by others in the industry, so that the sector did not suffer losses like those of the last financial year.

The Dunedin meat processor and exporter said last month that further "aggregation" was needed in the export-based industry, which had too much processing capacity in a tough 2011-12 season.

SFF reported a $31.1 million annual loss ended September 30, on revenue of $2 billion, compared to a $30.8m profit in 2011.

The loss was attributed to good pasture growth in 2011-12, which caused farmers to retain livestock. That caused a shortage of product in the market, and global lamb prices rose to unsustainable levels. Those high prices then caused a dramatic drop in demand, which SFF had not seen coming soon enough.

Southland-based sheepmeat processor and exporter Alliance Group reported a $50.8 m net loss for the year ending September 30, its first operating loss in 20 years.

There was more confidence in the marketplace and the co-operative was expecting a better season than last year, Cooper said.

The UK market had been "soft-ish" but SFF was seeing more positive demand from that market. This season lamb prices had settled to about $5 a kilogram instead of $8 a kg, compared to a record $8-plus/ kg a year ago.

In its annual report SFF said the outlook for lamb for 2013 was one of "cautious optimism". Improvements had been seen in recent months and the China market continued to grow.

Venison markets had remained stable over the past 12 months, with prices and demand "relatively steady" although the weak euro was affecting export sales to key northern European markets.

The US remains SFF's largest beef market, while the Korea, Japan, China and Taiwan markets continued to grow with a rebalancing of volumes away from the traditional markets of Taiwan and Japan into China.

Silver Fern Farms is a farmer-controlled co- operative representing more than 16,000 farmer shareholders. It operates 23 processing facilities.

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- The Press

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