Silver Fern Farms director election: Incumbent Ulrich wants a merger with Alliance Group for scale and efficiencies. He sees low price volatility when products are branded

By Herstall Ulrich*

Shortly, Silver Fern Farms director elections will be taking place, and as a director standing for re-election, I would like to discuss some of the key issues.

There has been a lot of debate, recently, around the need for the meat industry to restructure, with a clear focus on SFF and AGL needing to merge to achieve scale, “the Fonterra model”, with farmer ownership and control.

This is something that I originally stood for, and still believe would give us efficiencies of scale, eg logistics and plant configuration.

The notion that this would also achieve better returns from the market place is somewhat flawed, witness the current volatility in milk prices, which Fonterra with its global scale has not been able to duck.

The best way to achieve sustainable, improved returns from the global market place, is with a value creative strategy, being consumer focused, and delivering branded products.

Silver Fern Farms calls this the Plate-to-Pasture strategy.

This is the other main vision that I originally stood for and is something that I am still very passionate about.

Silver Fern Farms Reserve, Angus, Hereford branded beef range, Silver Fern Farms lamb and venison retail packs and Silere alpine origin merino are all enjoying significant price premiums, and above all do not succumb to price volatility which has become the norm for commodity products.

Consumers are consistently paying more for quality, taste, tenderness and value.

Clearly, a meat co-op with scale to achieve economies and efficiencies, owned and controlled by farmers, with a value creative, consumer focused, branded strategy,as its focus, is desirable. The SFF board is open to sensibly discuss any industry rationalization proposals, the obvious being with AGL. It will take cooperation from all parties to achieve this goal.

Meanwhile we must push ahead with our strategy, to that end SFF is looking to raise capital so we can invest in our strategy, “put our foot on the accelerator”, as our new CE Dean Hamilton describes it, reduce our reliance on bank debt, improve our balance sheet in order to withstand global economic volatility, and reduce the interest drag on the business.

It is my very strong preference that SFF remains a co-op.

A recent Rabobank industry note “Quenching the Thirst for Capital” discusses these very issues that many co-ops are facing, this is not peculiar to SFF.

We have hired an investment bank to help us investigate all the options.

We would prefer the capital comes from shareholding farmers, but understand this may not be achievable.

SFF has not been reticent in investing in recent years; Te Aroha, robotic and xray technologies and FarmIQ, as examples.

FarmIQ, of which I am a director, has produced outcomes like BeefEQ and the “Farm Management System” software, which are now commercially available for our farmers use to improve their on farm efficiencies and livestock prices.

Our current and future operational focus is on improved plant and business efficiency, reducing debt and material price improvement from our value creative strategy. All aimed at yielding significantly improved profitability, thus allowing us to, again, reward shareholders for their supply, by way of pool payments, and their investment, by way of dividends.

Standing for re-election, I offer years of governance experience, including two cooperative mergers, and the passion to drive home this vision.

--------------------------------------

Herstall Ulrich has been a director of Silver Fern Farms since 2008 and farms a 6,000 su property - The Rock Farm -  at Cave, South Canterbury. He is also a director of Vetlife Ltd, Farm IQ Systems Ltd and Indoor Dairy Solutions Ltd.