After a 'torrid' first six months, Allan Barber says the meat industry is looking ahead to better operating conditions. Your view?

By Allan Barber

This season is more of a challenge for the meat industry than last, although suppliers are still reasonably comfortable in spite of the lower lamb price which has now dipped below the $100 mark.

Good growing conditions in most of the country, especially the North Island, have removed the summer stress that always comes with drought and enabled suppliers to put a bit more weight on to compensate.

But for processors the combination of extremely high procurement prices, over $6 a kilo for lamb until end March, the exchange rate and low plant throughputs has meant a very challenging first half year.

Lack of half yearly financial reports from any of the meat processors, a very telling reminder that the meat industry and listed company status don’t mix, makes it very hard to deal in anything other than hearsay and rumour. Rumours of multi million dollar losses by at least one of the major exporters suggest the first half year has been fairly torrid and, while the second six months will be better than usual because of late stock flows, it won’t be easy to claw back big losses.

At least the high dollar has softened a couple of cents in the last two weeks and is tipped to soften further.

However the NZ dollar is coming off both recent and, in the case of sterling and the euro, all time highs, so it still has a distance to travel before procurement prices and processor margins can both be considered satisfactory by the farmer and processor ends of the local value chain.

This season is also notable for the first really serious industrial strife in the meat industry, from memory for more than 20 years. First there was the lock out at CMP Marton and now AFFCO has decided to take on the Meat Workers Union after some minor skirmishes at its Wairoa plant last year which were largely unresolved, at least not to the company’s satisfaction.

The Union is clearly convinced the argument stems directly from Talley’s ownership of AFFCO which is only partly true. Talley’s take a hard nosed attitude to union membership where this obstructs the achievement of the type of workplace agreements it desires, but I get the strong impression AFFCO’s management is also determined to make progress. The difference now is Talley’s financial strength means the company is strong enough to hold out until it gets what it wants.

Without trying to prejudge the mediation and facilitation process, I have the strong impression the Union doesn’t want to understand AFFCO’s determination to negotiate a more flexible collective agreement which is appropriate to the 21st century environment.

The claims about AFFCO’s desire to get rid of union representation in its workplace miss the point the company is making: it would be quite happy with a collective that enables it to do several things. These include introducing new technology, tallies and staffing levels consistent with technology innovations, species and cut specific processing specifications, making decisions about task allocation and training without being hamstrung by the issue of seniority, and introducing a meaningful drug testing regime and workable disputes resolution process.

Failing that it will continue to employ staff who are willing to sign individual contracts and there is plenty of evidence this is increasingly the case, not only at AFFCO, but also other processors like CMP which was still able to process at Marton during the lock out there, much as AFFCO has been able to do for the past two months.

This looks like a rearguard action by the Meat Workers Union to preserve its relevance, but if it insists on encouraging its members to hold out against logical modernisation of their core collective agreements, the long term result will be one of two outcomes: either the membership will demand a change of representation or the union will cease to exist.

Either way the meat industry should eventually achieve an industrial relations environment which reflects today’s livestock throughputs and technology, instead of those from the 1970s and 1980s when the present union representatives were young.

The other topical issue concerning the meat industry is the sector strategy which was launched with great fanfare 12 months ago and has been fairly quiet since. Nevertheless progress is occurring on a number of fronts, although some may have happened anyway without the sector strategy. A key development which underlines the reason AFFCO needs to win its dispute is the enormous move into new product forms and new markets which require certainty of supply and labour with different skills.

With prices easing from their peak, attention needs to be focused on best practice across the value chain and the sector strategy identifies the steps to achieve that, but it will not happen overnight. Beef & Lamb NZ’s PGP funded programme will add impetus to the achievement of best practice behind the farm gate, while the MIA is leading the charge on processing innovations.

The biggest improvement long term will come when most suppliers develop enough trust in their processor to sign a contract rather than chasing the spot market.

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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he run a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or through his blog at http://allan.barber.wordpress.com.

This column first appeared in Farmers Weekly. It is here with permission.