Chris Irons: Farmers opinions essential

Decisions on meat processing hinge upon farmers swotting up the facts.

The recent release of the Meat Industry Excellence Group's (MIE) report, Pathways to Long-Term Sustainability, which focuses on the processing aspect of the industry, is worth a read.

We've seen the Red Meat Sector Strategy (RMSS) report in 2011, which explored possible changes that could be made behind the farm gate and in the market.

This group of hard-working, dedicated and passionate farmers has put in a great deal of effort and personal sacrifice.

They believe that New Zealand's red meat industry can, through a united approach, move to a stronger position for all participants.

I encourage all to read this report if they want more information or are struggling to form a view. Of course, not everybody has agreed with all MIE's suggestions since they formed. This should not surprise us. The thing to admire is that they have not wavered against their critics in their determination to see change in the industry. The meat industry is a complex beast with wide and varied perspectives.

Ultimately, it will be up to the meat company directors to make the call if the options put forward are worth pursuing. Directors have strong legal obligations and will be worried about making big calls, especially if they think they could be marginal. It is important that the directors' decisions are in the best interest of their shareholders in a legal capacity and for the future of our industry.

I think most people will agree that there are some over-capacity issues in the sector. Although the delays in getting stock killed this year have been put down to the drought, some of the capacity issues are because some works cannot run at full capacity because they are short of skilled staff, and costs associated with upskilling them don't stack up.

You also run into storage and market issues when processing at higher than typical seasonal levels. The processor can pay additional storage costs, freeze the product reducing its value or provide additional product to the market which may not be wanted and receive a lower price. It makes me feel grateful knowing how lucky we are in the Waikato, having some very efficient, well-run operators.

Much of the discussion in the report around procurement focuses on reducing stock trucking miles. However, there are concerns from the industry over what coverage the proposed final plants will have. I see some areas that would be required to truck stock long distances, which is particularly concerning to me when I think of bobby calves and milk lambs. In my view, if the trucking miles are to be reduced it would require some level of toll processing (a service fee to partially consolidate and better coordinate the industry, providing a better return for farmers). This is a known concept, as other industries, one notably being kiwifruit, have very successful toll processing companies with the competition driving highly efficient businesses.

Right now farmers can only support the industry by aligning themselves with a company that suits their business and moral beliefs. So if the industry goes ahead with any rationalisation it would be useful to have farmers knowing what side of the fence they are on.

So where to from here? Please read the report with an open mind then share your views. For this industry to make any monumental changes, all participants will need to be on board, whether a large rationalisation or progressive smaller steps to something bigger.

* Chris Irons is Federated Farmers' Waikato Meat & Fibre chair.