Change or lose out, meat industry told

The meat industry's future relies on creating more value for its products, the MAF report says. Photo / Greg Bowker

New Zealand's meat industry could miss out on opportunities for international growth and lose out to rivals if it does not change its ways, a Government study says.

A Ministry of Agriculture and Forestry (MAF) discussion document released yesterday said the industry could potentially be a world leader of high quality, sustainably grown meat, but it warned there was little desire to make the substantive steps needed to take the meat industry forward.

Within the next 15 years, New Zealand could increase sales in Asia, Africa and the Middle East. Achieving that would require more integration and greater investment in markets.

"Collectively, the opportunities identified describe the potential for a vibrant sector that places New Zealand at the forefront of high-quality, sustainably produced meat, rewarding farmers for meeting consumer expectations in both traditional and new markets," the report said.

"This rosy outlook will not be achieved through inaction or simply 'carrying on as normal'.

"The next 10 to 15 years are likely to see a continued increase in the internationalisation of meat processing companies."

Substantial overseas investment in New Zealand "cannot be ruled out".

The report indicated there was little appetite for significant change, despite challenges from international competition, environmental concerns from consumers, lack of marketing focus, domination by large retailers and farmers wanting flexible supply arrangements.

"The overall impression is that respondents in the sector are largely only confident in predicting small incremental changes in the future," the study said.

"This does not rule out the possibility of more radical changes to the sector, but most respondents considered change of this nature less likely."

The MAF study followed two years of failed attempts by the industry to instigate mergers and partnerships and to change the way it operated.

The report said productivity improvements had enabled the industry to stay competitive, but the sector's future relied on creating more value for its products rather than competing on price and cost reduction.

Meat companies suffered from a lack of capital, an inability to invest in innovation and a competitive culture and structure designed to maximise throughput.

There was little incentive for farmers to invest in co-operatives, which owned half the sector, because share values did not increase in line with the company's performance.

Agriculture Minister David Carter said the report showed confidence in the long term, but farmers and the industry needed to start talking so that confidence turned into something tangible.

"With land prices no longer buoyant, the days of low-margin sheep and beef farms getting by on capital gains from land values alone are over for the time being."

Silver Fern Farms chief executive Keith Cooper said the report validated his company's strategy of an integrated supply chain where farmers supply the type of products required by customers when they want it.

MEAT MATTERS

* Meat generated $4.6 billion in export earnings in 2007/2008, or 15 per cent of New Zealand's total merchandised exports.

* Meat byproducts were worth another $1 billion.

* New Zealand accounts for about 40 per cent of the global trade in sheep meat.

* We are the third-largest beef exporter to the US, after Australia and Canada.

* The area of sheep and beef farms declined 2 per cent between 2002 and 2006.

Source: Ministry of Agriculture and Forestry, Meat & Wool New Zealand.

- OTAGO DAILY TIMES, BLOOMBERG