KEY POINTS:
Meat processor PPCS wants farmers to lift their eyes beyond the loading truck to consider the head-scratching customer shopping for their supper.
Chief executive Keith Cooper says one half of farmers think their interest finishes when animals are loaded on to trucks and the other half when products
are sold to consumers.
"I think the latter's the key point that farmers need to understand," Cooper says. "I guess on our roadshow our key commentary to suppliers has been don't so much look at us and say we're doing it all wrong, look in your own farm gate and see what you're doing wrong or how you're not contributing to the future of the industry."
Farmer co-operative PPCS wants to get more long-term supply volumes agreed by farmers and a procurement plan that began in May will be enhanced, including long-term pricing options.
PPCS posted a $40 million loss last week but says it expects to be profitable again this year and is restructuring to better match its processing capacity to livestock supply.
The Dunedin meat exporter has 25 processing plants, employs 9000 people at the peak of the season and accounts for about one third of national sheep and beef meat exports.
Manufacturing operations cannot be successfully planned without visibility and foremost among this is demand for finished goods and supply of raw materials.
It will be harder for PPCS to restructure without greater certainty about animal supply and equally hard to develop precise marketing plans.
To make things worse, PPCS cannot simply import raw materials from overseas - as firms in many other industrial sectors could do - to ensure its plants run to budget.
They need farmers to buy in to a long-term planning process and join a truly seamless supply chain - and they're not mincing words telling them so.
"What other business goes looking for their supply on a weekly basis," Cooper says. "They've normally got some certainty of supply so they can plan their infrastructure and plan their marketing."
Farmers like straight talking so the direct approach is a good start.
Meat and Fibre Producers' Council chairman Keith Kelly is backing the need for a better integrated supply chain.
"For the future of the industry we need to go down that farmer to market [route] ... not all the gaps, not the farm gate, not the works gate, not the exporter," Kelly says.
"We need a flow-on smooth through to whoever is at the end of the chain buying the product."
The days of shoppers getting what they're given are long gone.
If people can't get what they want, when they want it, at the right quality and price, then forget it. There's plenty more choice in the chiller.
The seamless supply chain may sound like business mumbo-jumbo and it's certainly not the future - because it's already the present.
Companies that intimately understand the end consumer and all parts of the supply chain feeding that customer are well positioned to succeed.
Visibility enables control and planning, which can eliminate nasty surprises.
In today's competitive world any company that limits its visibility to one link forward and one link back can be shocked to find the market has drifted away from them.
Worse still, a lack of visibility means they probably wouldn't know why it happened or even which direction it went in.
SHEEP GO MOO
PPCS says a short-term forecast issue in the North Island in terms of supplier base is the result of a drought last year, but the main area of concern to the industry with regards to capacity was Southland, where ongoing dairy farm conversions are significant.
"Plus the land coming out of use for sheep farming and beef farming as it's converted to support functions for the dairy industry," says chief executive Keith Cooper.
Southland is a significant supplier base for lamb and was going to be the most heavily impacted over the next three years, "which will impact not only on PPCS but those who also operate within that region".
Meanwhile, there was no anecdotal evidence of a major issue in regards to a hangover of UK lamb from the foot-and- mouth outbreak in that country.
"There's clearly going to be a number but at the same time they have reopened the continent to export trade and that may well absorb numbers in the short term," Cooper says.
There could be some early season distortions, particularly in January.
"That could be a good thing for the New Zealand scene in that we have limited ability to supply a lot for January [and] February arrival anyway, particularly in view of the forecast supply profile in the coming month to six weeks."
The UK is also only one market and many other markets are strong, he adds.
Opportunities for significant growth in returns from North America will be limited for the next year following the re-emergence of drought in Australia and the subsequent stock this will put into the market.
A2 OFF TO ASIA
A2 Corporation has signed an exclusive licensing agreement with a South Korean dairy company to sell fresh milk in that country.
The NZAX-listed firm owns and licenses intellectual property for identify cows, producing and marketing milk with the A2 beta-casein protein.
There are two types of milk, A1 and A2, which are usually mixed together. The A1 beta-casein - a gene carried by about half of New Zealand cows - has been linked by some people to heart disease, diabetes and schizophrenia.
The debate about safety boiled over last month when Lincoln University professor Keith Woodford - who recently published a book on the subject - accused the Food Safety Authority of pre-determining the outcome of a 2004 study, changing the outcome from uncertainty about safety to one of certainty and taking an approach of sustained misinformation. The result has been plans for another study.
A2 Corporation chief executive Anthony Lawler says the company had a 30-fold rise in hits on its website and had product out of stock in Australia following the release of Woodford's book.
"Even a month afterwards we're still seeing a sustained baseline increase," Lawler says.
The deal with South Korea's Lotte Milk will give the company a substantial presence which will be used as a springboard into other markets in Asia, he says.
"This opportunity also extends the potential to consider yoghurt and other Lotte Milk dairy products in addition to their fresh milk range."
Lotte Milk will guarantee a minimum royalty for an initial two years - worth hundreds of thousand of dollars each year to A2 Corporation - with products due to go on sale next year.
"Like any company at our stage we would see us reinvesting that into the business either into driving the Korean market or in other markets," Lawler says.
Lotte Milk distributes nationwide in Korea and plans to convert 60 per cent of its fresh milk volume within three years.
A2 chairman Cliff Cook says the commitment by Lotte Milk for a multimillion-dollar marketing budget is one of the most pleasing aspects of the deal.
Some people will be happy to pay more for A2-based milk, which sells at a premium similar to organic produce, and irrespective of the outcome of the new study the publicity will likely boost demand.
Not too many years ago organic food was scoffed at as something for the greenies. Before that it was free range eggs. Both are now firmly established and A2 will be aiming to follow suit.
RMA 'UNFAIR'
Federated Farmers says the Resource Management Act is in urgent need of an overhaul. Environment spokesman Bruce McNab says the RMA is unfair, unpredictable and overly bureaucratic.
"Farmers can effectively have large chunks of their privately owned land locked out of reach by the RMA without compensation and in some cases without prior consultation," McNab says.
"The RMA is a compliance nightmare for farmers. Their rights constantly change under the act, so they can never be certain that a legitimate decision made today regarding management of their land will still be legitimate next week, next year or in five years' time."
SULPHUR TEST
A new test developed by AgResearch aims to tell farmers how much sulphur fertiliser is needed in their soil.
The test will be promoted by Ballance Agri-Nutrients and plans to replace two traditional soil tests. AgResearch senior scientist Anwar Ghani says the test is more robust and reliable.
"It is less influenced by the effects of leaching, urine spots and recent fertiliser inputs than the sulphate-S test, so is capable of giving a much more accurate indication of whether or not sulphur fertiliser is required, and the likely pasture response." The new test has taken four years to develop.
Gordon Rajendram, who devised the test as part of a PhD project, says sulphur is one of the more important major elements required for plant growth and deficiency causes yellowing of leaves and poor pasture growth.
"The new test overcomes many of the shortfalls of the current sulphur tests and will give the farmers more confidence when determining the sulphur status of their farms."
