Red meat farmers can ‘slug it out’
ANZCO FOODS titan Sir Graeme Harrison says the latest report on the red meat industry understates the ability of the meat companies to slug it out through ‘‘attrition’’.
Farmers with a controlling stake in the red meat industry are on a collision course with corporates, he said.
The Meat Industry Excellence (MIE) industry report released on Tuesday advocates rationalisation and estimates $445 million in savings from the merger of the two biggest meat companies, Silver Fern Farms and Alliance, and several smaller players.
Harrison indicated the farmer group’s analysis focused too much on Silver Fern Farms and Alliance and on sheepmeat rather than beef, wool and prospects like sheep milking.
Asked to comment further, the founder of the privately-owned, beef-centric Anzco referred Fairfax Media to a paper he published in December.
Few outside the red meat industry understood how competitive it was. It was inevitable some businesses would fail to keep up, he said in that paper.
Harrison, a renowned advocate for free-market policy, said no-one could expect a clamp on new meat plants or a stop to the closure of others unless they wanted a return to the highly regulated industry of the late 1930s to early 1980s.
As an owner of a thoroughly private, mostly foreign-owned meat company, he did not spare sentiment for collective farmer ownership.
Co-ops had only persisted in countries where there had been a history of import protection or industry regulation, like Scandinavia, he said in the paper.
In the major beef and sheepmeat, export-producing countries no leading processing companies were cooperatively owned other than in New Zealand.
‘‘As the New Zealand meat industry evolves towards servicing markets throughout the year with chilled and manufacturing meat items, the traditional co-operative model will . . . be on a collision course with the corporate owners needing to vertically integrate back into livestock supply sourcing.’’
The red meat industry structures were those that farmers wanted.
‘‘Like it or not, sheep and beef farmers are traders. Individual choice is a core belief in our society. Farmers have traditionally wanted choice and they have determined the industry structures that are in place,’’ Harrison said. The red meat industry was not fragmented or lacking ideas as some commentators suggested, he said.
The prospect of strong demand for beef and sheepmeat in Asia meant a return to an ‘‘ongoing, heavily regulated processing sector makes no economic sense and nor will it comply with New Zealand trade agreement regulations’’, he said.
As a declared ‘‘insider’’, Harrison said processing and marketing companies were in survival mode ‘‘as each endeavours to live on thin margins until some others around them succumb’’.
Collectively, it was a battle for the industry to stem the tide in sheep and cattle farming converting to dairying.
Red meat companies had been engaged in the ‘‘latest battle’’ for at least the past five years.
Harrison, a Mid-Canterbury lad who first advised the Meat Board in 1973, said the last period of similar ‘‘survival pressure’’ occurred before the collapse of publicly-listed Fortex in March 2004. This was followed by the collapse of Weddell New Zealand five months later.
Ownership was more concentrated than it had been for 100 years, with four major players (Silver Fern Farms, Alliance Group, Anzco Foods and Affco) supplying about 75 per cent of the livestock throughput.