Wednesday, May 18, 2022

Carriers feeling the heat

Livestock carriers are coming under increasing financial pressure and some in the industry say unless changes are made to help alleviate that, more transport companies will be forced to follow the example of Wairarapa-based Pinfolds, which recently announced it was shutting its doors after 102 years of business.

Alliance Group chief financial officer Kristian Saksida said as a red meat processor and exporter, it is acutely aware of the rising costs and pressures of operating a business.

Livestock carriers are coming under increasing financial pressure and some in the industry say unless changes are made to help alleviate that, more transport companies will be forced to follow the example of Wairarapa-based Pinfolds, which recently announced it was shutting its doors after 102 years of business.

Mangatainoka-based Beale Transport director Regan Beale said there are a range of different burdens that livestock carriers are currently having to deal with.

One of those is because of space restrictions at meatworks, processing companies are filling trucks with small loads from multiple farmers, so truck drivers are having to drive greater distances to fill their trucks, rather than just stopping off at one farm.

“They (processors) want to keep farmers happy but it comes at our cost,” Beale said.

“Instead of (carriers) being able to go to one farm to get a load of sheep out, they’ll (processors) split the load between say five (farmers), which means we’ve got to do a lot more kilometres to get a load but we’re paid the same money (per animal carried).”

“That means we’re losing money out the bottom every single time.”

He does not blame farmers for wanting to move whatever stock away they can.

“I know that a lot of farmers have got our backs but from what some of them have said to me, things are tight and even if it’s a pain in the bum for them, if someone’s going to turn up and take 50 lambs off their hands, they’d rather see 50 go than none at all,” he said.

“From their point of view, they have to take what they can get.

“I understand that, but we still get paid the same per lamb that’s going to the works and instead of that lamb going from point A to point B, we’re going around four or five farmers to make that load up.”

He says as well as the fuel cost, there’s also a time cost.

“It’s not sustainable and they (processors) know that,” he said.

Beale said out of all those involved in the supply chain – farmers, stock agents, carriers and processors – it’s the carriers who wear most of the cost and risk.

“But when we ask for a 10% increase to cover costs all hell breaks loose because of the idea that we’re trying to rip people off,” he said.

“That’s not the case at all.”

He said until farmers realise some of the pressures that stock carriers are under, and he does not want to say that it’s farmers’ fault, in the future they will find that a 10% increase in the carrying price wasn’t too bad after all.

“Because they won’t be able to get anyone to move their stock or cart their grain or fert,” he said.

He also takes issue with meat processor Alliance’s 90-day payment policy, saying accounts need to be settled more quickly than that.

Unless there are changes to help meet some of the challenges carriers are facing, he said other stock transporters will be forced to close.

Alliance Group chief financial officer Kristian Saksida said as a red meat processor and exporter, it is acutely aware of the rising costs and pressures of operating a business.

“That’s why earlier this year we introduced a FAF (fuel adjustment factor) to lessen the impact of volatility in the fuel market on operators,” Saksida said. 

“The FAF acknowledges the cost impact of fuel price changes, as well as the challenges of seasonal variations in volume. 

“We believe the increase strikes a balance between recognising the increased fuel costs and allowing us to maintain a sustainable and profitable cooperative for our farmers.”

He said Alliance’s payment terms policy for suppliers of goods and services is aligned with its own cash cycle.

“We have to pay for stock, incur the costs of processing, but don’t receive revenue from our customers for a number of months,” he said.

“We are always careful to ensure suppliers are aware of this payment terms policy from the outset.”

A livestock transport industry insider, who did not want to be named, said farmers could help carriers by taking more responsibility for stock effluent, as the cost of dealing with it is a significant issue that could be addressed if farmers stood stock for longer to empty out before being transported.

He said setting up a truck wash costs more than $500,000 and his company spends $10,000 to $15,000 a month just to wash trucks out.

“It’s $300 to $400 each time you have to wash out,” he said.

“And if you have to do that after every load, you’re going backwards.”

He said stock needs to be stood off feed for at least six hours and for early delivery, same day kills, it needs to be the night before.

“Farmers think the longer they leave stock out on feed they are going to get extra grams, which might make them a couple of extra dollars but basically it’s just pinching from us, because it costs us,” he said.

He said rates paid by meat companies to carriers to transport stock need to be increased and although are not the only pressure point for trucking companies, for some they will be the straw that breaks the camel’s back.

“There’s going to be more livestock (carrying) companies going under within the next 12 months,” he said.

“I guarantee it.”

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