Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and APNZ wire agency

Mood for change in the meat industry

Beef and Lamb expects lamb numbers this spring to be down on last season by 2.5 million animals. Photo / APN
Beef and Lamb expects lamb numbers this spring to be down on last season by 2.5 million animals. Photo / APN

Behind-the-scenes moves are under way to restructure the New Zealand meat industry.

The sector, under pressure from overcapacity and competition for land use from dairy and forestry, faces the prospect of a severely reduced lamb kill arising from the drought early this year.

Lamb prices have come down to $85 per head from $113.50 in 2011-12 but are expected to improve to $98 a head in 2013-14, according to New Zealand Beef and Lamb estimates.

Owen Poole, chairman of Southland-based Alliance Group, said the demand balance was going in New Zealand's favour.

"A new [industry] model would assist that, so it's all been worked through [ ... ] with a number of companies involved, so we'll see where it takes us," he said.

Poole, in Auckland to attend the Red Meat Sector Conference, declined to elaborate, but industry sources said there was a strong appetite for change from farmers and the meat companies.

Alliance reported an operating loss before restructuring costs of $57 million for the year to last September, down from a profit of $20.7 million in the previous year.

Poole said the company would turn a small profit this trading year. The industry is estimated to have lost about $200 million last year.

Alliance, together with Otago's Silver Fern Farms, represents just over half the meat industry.

Both are farmer-owned co-operatives, with the rest of the sector tied up by several different local and international companies.

Poole said there was a mood for change in the industry.

"There is a suggestion that we need a better model and I don't think anyone has any disagreement with that," Poole said. "The trick is finding a model that we can get agreement on with a wide range of stakeholders that will deliver the business."

The industry was "disparate" in nature with a range of different stakeholders, he said.

"Trying to find the ideal solution in these circumstances is challenging, but we're working on it."

Beef and Lamb chief economist Andrew Burtt told the conference that dairy now takes up 2.3 million hectares of land compared to 1.35 million in 1990-91.

Between 1990-91 and 2013-14, dairy cattle numbers increased by nearly 90 per cent while sheep and beef cattle numbers fell by 47 per cent and 22 per cent respectively, he said.

Taking into account land use changes, livestock number changes and other factors, such as the impact of the drought, Beef and Lamb expects the lamb crop this spring to be down on last season by 9.3 per cent, or 2.5 million lambs.

This would lead to an estimated lamb slaughter of 18.2 million, down 10 per cent compared with 20.3 million in 2012-13.

- APNZ

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