Allan Barber says let’s stop whinging about a dysfunctional meat processing industry because the imbalances are just for a few core processors

By Allan Barber

Hearing Tony Egan, MD of Greenlea, on Radio NZ talking about companies’ performance emphasised what I already knew, but may not have commented on sufficiently in my column about the Meat Industry Options paper.

The meat industry is really a two speed industry with a number of companies doing pretty well in the present environment, while generally beef production and processing tend to be more economically viable than sheep.

This raises the question of just how dysfunctional the meat industry really is.

To assess the outcome of MIE’s farmer meetings and the campaign to get representation on the boards of SFF and Alliance, one could be forgiven for thinking that there was nothing right with the red meat sector.

To read the Options paper without question, it may appear that all the options listed are either essential or feasible.

Egan’s comments admittedly come from the perspective of a beef company senior executive located firmly in dairy’s heartland, but he raises some valid points. He cites innovation, profitability, cooperation between companies and labour relations as all pointing to a functional industry.

In conversation with me he pointed to the unlikely scenario of a toll processing model with separate export marketing, one of the options listed in the Feds’ document.

He also made the point there were a number of suppliers who are happy with their relationship with their processor which suggests not every farmer feels dissatisfied with their returns from the market. I have also had this confirmed by other meat companies, so it is definitely not an industry wide problem.

I still stand behind my judgement of Sarah Crofoot’s Options paper that it is a very good means of encouraging farmer engagement in the process of making decisions about what sort of industry they want in several years time.

But it shouldn’t be regarded as an absolutely accurate portrayal of an industry in crisis.

As I have said many times before, farmers need to take responsibility for developing better relationships with their processor so they can supply to a more consistent and predictable pattern. In this way the processor will be able to supply the market with the right product at the right time, entailing less wastage and better returns.

I regularly see comments bemoaning the lamb price as not being high enough to support the farmer, consequently the change to alternative land use will continue irrevocably. Therefore I presume the implication is meat processors must pay more, even if the product isn’t worth any more.

At some stage there will be equilibrium between production volume and market demand, as is the case with every other commodity. If that is lower than the present national lamb drop, there will be rationalisation of processing capacity. Companies with too much capacity, either in the wrong place or for the wrong species, will have to address that imbalance and this will have to be borne by the shareholders.

If that is what has to happen, so be it, but let’s stop whingeing about a dysfunctional industry.

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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or read his blog here ».