MIE reforms the way to go

The constant fudging of the truth by AGL governance and management via shareholder emails and in the farming media is unacceptable. 

To be fair to our new chief executive, he will only just be beginning to understand the challenges he has taken on. Mr (David) Surveyor doesn’t have time to waste on petty politics and I trust he will focus on the key issues and listen to his shareholders.

True co-op behaviour encourages a culture of loyalty, transparency and most of all honesty, and from this flows commitment between producer and processor. Throwing up ‘red herrings’ such as, “the Commerce Commission won’t approve” or “our trading partners will block our exports” is inherent nonsense. 

These are our farms, our families, our businesses and this is our country.  Clearly highlighted in the MIE report is that there are hundreds of millions of dollars of commercial reasons for consolidation. But— just as importantly – it is clear that strong levels of competition remain. Farmers need not fear consolidation, they should embrace it.

The sweetheart deals now prevalent with traders, third parties and producer groups are foreign to co-op culture. No farmer should or would invest further outside the farmgate until this changes. 

The MIE report shows a pathway to establish this new co-op model and how this culture will encourage farmer support through commitment and investment. The New Zealand Government has promised legislation provided we have a large majority of producer support for this model. 

So the AGL claim to the contrary and its threat of five months backlog during drought and peak kill times are just scaremongering. Waiting lists to kill stock are not caused by lack of plant to process stock. If every South Island plant operated a single shift for 44 hours per week the entire South Island’s lamb kill would be processed in 28 days. 

What other industry has the luxury during peak periods like Christmas to take two weeks off and then only operate 5.5 days per week thereafter. Nelson AGL plant only killed 35% of the days from January 31 to February 8 2015. 

Farmers are used not only as a holding paddock to stretch out the season, but the processors also cynically use our overdrafts to fund their poor performance. Meanwhile, farmers pay heavily to carry 51% overcapacity when most is not used during droughts. 

The structure of our industry today is the problem. What processor would engage their surplus chain or introduce another shift with no guarantee of supply? Another company’s idle plant could be engaged and steal supply, leaving them severely disadvantaged financially. 

Many farmers are so restrained financially that for the lure of a few cents/kg more they will supply the second company in this case. The companies then have the cheek to call the cash-strapped farmer disloyal, despite it being the co-op’s unfair procurement behaviour that is the root cause of farmers needing to look for an alternative to survive.

This is an inherent problem and we must change the model and refocus our attention on the $/kg we are leaving on the marketplace table. The current level of overcapacity is costing every farmer an estimated $10.35/lamb.

Multiple exporters offering meat at the same high spec is price destructive. 

There is ample evidence of trade relationships between a NZ exporter and international supermarkets only lasting a short while, until their price is not the cheapest. 

This is the reason our UK counterparts protest at NZ meat wholesaling at half their domestic value. 

If, as we are told, our lamb is the best in the world, why on earth sell it for half price? It seems to me that this form of selling is simply an exercise in disposal to recover costs, rather than any kind of concerted effort and investment to grow our share of the value chain. 

The Red Meat Industry ‘Pathways to Long-term Sustainability’ report identifies the need for some plant closures. It is must be understood a hypothetical model was used in the report to identify the inefficiencies (read cost!) absorbed by every farmer in NZ. Any closures will be determined by farmers’ supply behaviour and future profitability. 

MIE has a goal to drive sustainable profitability across the entire red meat sector and hence arrest the 3000 sheep per day decline of the past 20-plus years. Real opportunity to grow our drystock farming exists with reform, so we must reverse this trend. 

We, the farmers of NZ, have made incredible productivity gains on farm and now it is imperative we capture real value back from the market otherwise we will simply have to run faster to stand still. The threat of foreign ownership is real and our co-ops’ balance sheets are not strong enough to compete with next to zero percent sovereign fund capital via off shore multinational conglomerates.

I urge all farmers to read the MIE report and understand the issues. The report also highlights that if we choose, we as farmers can grasp the exciting opportunity unravelling right in front of us – an opportunity that could just provide the long-term sustainability we need. The world needs our high quality meat protein.

• Nelson farmer Dave McGaveston is a shareholder of Alliance Group and a member of the Meat Industry Excellence Group.