Strategic thinking urged

A call from this agricultural academic for farmers to partner with a meat company and stick with them for a period has been made before, but seems to fall on deaf ears especially with north island farmers.

As he has decribed the meat industry is a tough sector to compete in, but some farmers believe its just as tough to supply to meat processors and remain profitable in the long term.

Many farmers especially those with debt, need to survive this year, before they worry about medium term partnerships and favour the best price on the day approach. A more transparent price poilcy would rebuild the trust that has been lost over the years between some farmers and their processing buyers.

Why is it that  North Island farmers seem to be lagging behind in this partnership approach to livestock selling? Your views?

Massey University Professor of Agribusiness Hamish Gow says farmers need to partner themselves with a meat company with a marketing, processing and procurement strategy that aligns with them, and stick with it. Hamish Gow spoke to 60 farmers who packed out Scott and Ross Linklater's woolshed at a Manawatu Finishing Farms Seminar in Halcombe reports The Manawatu Standard.

Prof Gow said meat processors in New Zealand were as efficient as they could be within their current market structures. However, new business models existed that provided interesting opportunities based on the separation of meat processors (those who run the hooks) and marketers. He said both were driven by different needs and, instead of trying to do both, as most meat companies do, experiences from other industries indicated that potentially they should be run separately.

"Throughput, getting meat on hooks, drives a lot of the meat industry in New Zealand. We've got decreasing lamb numbers and so the fixed costs associated with too many hooks is driving many of the industry's business models." Prof Gow said the more stock a meat processor put through, the lower per head cost, and that had been driving the price.

"People get caught on that treadmill. It is not the meat industry's problem. The rapid expansion of dairy has meant that there are a lot fewer lambs going through meat plants, and processors have been caught with extra capacity." He said processors understood that and plants would have to close, but they were playing a wait-and-see game, to check who would close a meat works.

Prof Gow said at the moment many New Zealand meat exporters, and those from other countries, were beating each other up and competing on price only. Good news for the supermarkets and consumers, but not for those marketing livestock. "Selling meat is a brutal business and we're generally doing a good job overseas but, with the recession, price is king. "You need to create what I call blue ocean spaces. It is moving into new space and thinking differently about consumers."

Farmers needed to think about finding a processor and marketer that met what the market needed. "They need to think, which one makes sense for me? And they need to think about supporting them long term. At the moment there are too many farmers jumping from one meat company, to another."