Traders are screwing the scrum

The long awaited Red Meat industry strategy to guide the industry collectively in the future, is to be released tonight. It's success will be determined by the buy in by all participants in the processing and marketing chain.

History has proven that the processing sector has been very poor in working together for a common goal for their industry.This year has been a prime example with one large meat companies directive "pay what ever you need as long as you secure animals and beat our competitor". How will this attitude breed loyalty to processors? Whether this report will galvanise them to adopt an industry approach only time will tell, but rather than blaming farmers for lack of loyalty the companies need to act with discipline in stock procurement to earn that respect from farmers.

Alan Barber comments have seperated the role stock agents play, and those of traders which is where he sees problems occurring. Surely a co-operative transparent approach by all companies could solve these issues, and most farmers would support such an approach. The Southland farmers comment that "changes would need to be driven by the processing sector not the farmer" are the key to this strategys success. More transparent pricing and procurement will be needed before any progress will be made for a unified meat industry future.

Red Meat Strategy Executive summary LOOK HERE

A new 167-page strategy designed to illuminate a path towards sustainable profitability in the $7 billion sheep and beef sector will be released tonight, but farmers will not expect a silver bullet solution for the troubles affecting their industry. Beef + Lamb NZ and the Meat Industry Association commissioned the strategy to identify underlying challenges in the red meat sector and ways for it to realise its potential, described as a "critical step" towards improving profitability.

Report architect Alasdair MacLeod, of Deloitte, told a public consultation meeting, by supplying meat processors directly and cutting out stock agents, farmers could reap benefits of up to $100 million in the first year. They could also improve profitability over the next five years by taking advantage of existing scientific knowledge and technology, while the the sector needed to become more market-led and work on global marketing reports The Southland Times.

Farmers spoken to at the Lorneville saleyards yesterday believed the industry had reached a point of uncertainty that would allow them to embrace a "radical proposal", as long as the ideas were sensible. They agreed marketing was something the meat processing companies needed to work on together.While returns for red meat were good now, there was no guarantee they would stay there and a payment schedule that changed weekly made it difficult for anyone to operate a business. Changes would need to be driven by the processing sector, not by the farmer.

As one livestock manager said to me, “nothing has changed except the faces” and even some of those are still the same, except older than they were when I was working in the meat industry reports Alan Barber.In the Red Meat Sector Strategy consultation document, much was made of the suggestion removing third parties, notably stock agents, from the supply chain would save the farmer large sums of money. There’s no doubt a good stock agent can add rather than destroy value, especially where they  concentrates on store stock.

But I’m pretty certain the role of traders is less beneficial, because of their capacity to supply large volumes of livestock for which most meat companies are willing to pay a premium. The upside is certainty of supply to fill capacity at one or more plants, but the downsides are numerous: higher procurement price, angry smaller suppliers who may be refused killing space and certainly won’t get the same money, direct supply from saleyards and disgruntled livestock buyers to name four obvious ones. Other more subtle downsides are the effect on farmer and buyer loyalty and the likely lack of livestock to a consistent specification.

The trouble with this whole question is deciding where you draw the line between a genuine large volume farmer and an out and out trader. There’s no doubt they can provide a very good service which is worth paying for, especially when livestock is reared on farm or bought store for finishing. But a direct consequence of the meat industry’s fixation with volume is to fill capacity instead of an insistence on stock to the correct specification. I am convinced every meat company is guilty at times, some more often than others, of accepting stock which doesn’t come up to scratch, but helps with overhead recovery.

So Deloitte’s original conclusion in the draft Sector Strategy about the need for farmers to align themselves with a processor which meets their business strategy looks spot on. All it would take is for farmers to make a commitment to be loyal provided the processor returns that loyalty.