KEY POINTS:
The struggling meat industry has passed up another opportunity for a unified sector strategy with the shutdown last week of a taskforce set up by Meat & Wool New Zealand.
PricewaterhouseCoopers had been appointed to help the taskforce complete a sector strategy but withdrew after it became clear
it was unlikely to be given consent by all industry participants, and so the taskforce itself was disbanded.
Sheep farmers have faced years of low returns, and animal numbers have been dropping in the face of drought and conversions to the booming dairy sector.
New Federated Farmers president Don Nicolson says sheep farmers will find profitability still severely tested despite a possible price rise of about $15 to $20 a lamb next year.
Silver Fern Farms (formerly PPCS) expects there will be at least two million fewer lambs in the South Island next season, with North Island sheep numbers dropping by more than 500,000 during the next three years.
The failure of the taskforce comes after meat processor Alliance Group turned down an opportunity to merge with Dunedin-based rival co-operative Silver Fern Farms last year, and a bigger meat industry mega-merger proposed in February by Alliance fell over in April because of an inability to reach agreement with Silver Fern Farms.
Meat & Wool New Zealand chairman Mike Petersen says the disbanding of the taskforce is damaging to the sector.
"This is just carrying on a history of this industry where individual companies pursue their own agendas. Look, I understand the need for company strategy and it'll never always be the same, but at a high level there's a whole lot of stuff that we should be doing together and that's now not going to happen."
Meat & Wool has done a lot of work and analysis on the needs of the industry, Petersen says.
"We're now going to look at the market trends, the key things that we see as being important.
"We're going to work with farmers and try and put strategies in place for farmers to be able to meet those market trends.
"Unfortunately now there's a gap in the middle, there's a processing sector that are not going to be a part of that."
Work on an industry solution will continue in a different form, Petersen says.
"We will facilitate farmer discussions and develop strategies for farmers that benefit the areas of the value chain where we can have influence."
Meat & Wool says in particular one participant, who was not named, advised it did not support an industry strategy and preferred to follow its own path.
"We've said, 'look, the door's open. If the industry want to come to us and complete the whole sector strategy as we'd envisaged, we're certainly happy to talk'," Petersen says.
Anzco Foods chairman Graeme Harrison says the taskforce, of which he was a member, had a role to play, although its failure will not result in huge damage to the sector.
"The problem with the whole taskforce process, as with many other things that have gone on, they take a bit of a political lead into things rather than necessarily getting down to the commercial tin tacks."
Bringing in outside consulting had made sense, he says.
"But clearly you've got to have commercial parties prepared to engage, otherwise it's not going to work and that didn't happen."
Sooner or later there will be moves to rationalise the industry because of less livestock, Harrison says.
Federated Farmers Meat & Fibre Section chairman Bruce Wills says producers struggling to make ends meet had been keenly awaiting the outcome of the strategy assignment.
"Farmers were convinced this process would come up with the key analysis and ideas necessary to take the ailing industry forward.
"Members can be assured I will be talking to other industry players so that the restructuring, desperately needed by the sector, continues."
The next batter up to the plate is the Meat Industry Action Group, which says it has gathered enough support to ask both Silver Fern Farms and Alliance Group to hold special general meetings to help drive industry consolidation.
Co-ordinated industry-wide restructuring is unlikely to happen without an agreement between the two co-operatives, Alliance and Silver Fern.
For the moment individual companies will continue to develop their own strategies, which for Silver Ferns Farms includes restructuring capacity to better match supply.
The Meat Industry Action Group says a groundswell of support stems from a recognition by farmers that top-down initiatives have failed and that grassroot farmers must initiate change.
Farmers do own their co-operatives, so if they are not happy and can present a unified front and speak in one voice then action could ensue.
Although Meat & Wool's Petersen says there is now a danger of talking about structural change without understanding the real market needs, in other words, without the umbrella strategy the disbanded taskforce had been trying to develop.
While the next batter limbers up, a man with a reputation as a big hitter is eyeing the pitch.
Craig Norgate, chairman of rural services company PGG Wrightson, has a track record for consolidation, racking up close to 50 mergers or acquisitions at the last count.
At the age of 29, he became chief executive of Kiwi Co-operative Dairies and through a series of acquisitions and mergers boosted its revenue from $300 million to $4 billion, before going on to become the first chief executive of Fonterra. He has called the meat industry a "bloody disaster" and said he's not going to sit back and watch it go through another season like the previous one.
Industry eyes may have shifted from the mega merger to the taskforce and now the action group, but Norgate is firmly in the peripheral vision.
FAST FORWARD
The Government announced details of how its $700 million New Zealand Fast Forward fund would be managed last week, which with interest is expected to grow to about $1 billion during the next 10 to 15 years - the lifespan of the fund.
Agriculture Minister Jim Anderton says the fund will be governed by two new Crown companies, one with a three-member board responsible for the stewardship of the Government's contribution, and the other with up to seven members to fund innovation programmes from farm to fork.
During the lifespan of the fund industry groups are expected to match the Government's investment and so far there are indicative commitments of about $70 million a year.
"This is a sign that industry recognises the benefit of the New Zealand Fast Forward initiative," Anderton says. "This is the single largest boost to innovation in our nation's history."
The two boards are expected to be set up within a month.
BEEFY EFFORT
In the game of "Who's got the biggest investment bling?" Indonesia may have played a trump card.
Bloomberg reports that the Indonesian Government is planning to help set up 1000 cattle breeding ventures at a potential cost of 10 billion rupiah ($1.4 million) each - a possible $1.4 billion investment into only one sector.
The aim is to increase production to meet demand and stop the importing of beef and cattle within five years, with banks potentially providing loans which the Government will guarantee.
Indonesia accounted for 24,300 tonnes of beef exports from New Zealand in the year ending September 2007, equivalent to about 7 per cent of the total and a significant increase from about 3500 tonnes in 2001.
In value terms beef exports to the Southeast Asian country were worth about $76 million in the year ending September, or about 4.6 per cent of the total.
Meat & Wool New Zealand economic service executive director Rob Davison says the Indonesian plans are of interest and will be noted but will not be a dominant concern, with other markets expected to grow.
The New Zealand Shorthorn Association says there are challenges facing beef farmers but the long-term future looks positive.
Association president Judy Austin says rising world food prices, mainly because of surging prices for corn, wheat and soybean oil, are going to have a positive long-term effect on the demand for beef.
An increase in bull sales at the New Zealand Beef Expo was seen as evidence of confidence in the sector.
"Despite the current environment it's clear farmers are still investing, with an eye to positioning themselves with the type of stock that will be able to deliver when farmers need it most," Austin says.
"Shorthorn has traditionally been thought of as the hardy breed, but farmers the length and breadth of New Zealand are adding force to that, extolling the ability of the cattle to grow out well on conditions that range from 400 metres above sea level, to drought-prone pastures, bush and rough gullies," she says.
The association says US demand for New Zealand beef is expected to stay strong on the back of a domestic ethanol boom and food price inflation.
The free trade agreement with China also held positive implications.