Silver Fern Farms is warning that lamb prices may not have reached the bottom – but says its plate to pasture strategy provides the roadmap for recovery.
Directors and senior management met with 70 suppliers in Gore, where they faced questions about the company’s direction. The company said multiple times that supplying affluent consumers is the correct strategy.
Suppliers appeared resigned to current lamb prices but were given additional bad news that prices could ease further than earlier company projections of $5.80 – $6.60/kg through to January.
One farmer commented that current pricing is not sustainable for farmers or the industry.
Chief executive Simon Limmer told the meeting the issue is not a supply problem but a challenge capturing value.
Weak global economies and record production from Australia have reduced prices, but Silver Fern Farms (SFF) global sales operations manager Glen McLennan said it is working with United Kingdom and United States retailers to promote sales associated with Thanksgiving, Christmas and Easter.
Exporters are watching orders and prices for Chinese New Year closely, but consumers remain cautious.
Beef prices are more settled, assisted by a slowing US domestic kill, but McLennan said a potential issue in the first quarter of next year is the release of 65,000 tonnes of tariff-free Brazilian beef into the US.
He said an additional four Brazilian processing plants have been approved to sell beef into China and McLennan said SFF needs to start telling its grass-fed beef story better.
Brazil does not have it all its own way. McLennan said the European Union requires imported Brazilian beef to be accompanied by geolocated data identifying where the animals come from, along with satellite imagery to prove that is not deforested land.
Infringement of the ban on meat from deforested land could cost an importer a fine up to 30% of their turnover.
Venison prices are stable and showing resilience despite issues with food service.
McLennan said margins for beef achieved by SFF-branded product are superior to those for commodities, which is evidence its plate to pasture strategy was working.
Chief supply chain manager Dan Boulton said the company is carefully managing its costs, but one exempt area is processing sites, where $70 million was invested in the past year.
Boulton said new products from the fifth quarter such as blood derivatives, pet food and skins offer enormous potential.
Chief operating officer Brenda Talacek told the meeting that SFF is starting the season with sufficient workers for its plants.
Through recruitment, retention and lower absenteeism, it has 500 more workers than it had at the same time last season.
SFF Co-op shareholder relations manager Clark Taylor said changes to the company’s patronage programme will reward breeders of store stock who qualify to receive payments from next year.
Greg McSkimming, the company’s agribusiness and strategic solutions manager, said the company is looking at options for dairy beef, given changes to rules on the treatment of bobby calves.
SFF does not want a proliferation of retained dairy-bred cattle displacing beef breeds, so is investigating options such as fast finishing, bulls, once-bred heifers and yearling beef.
McSkimming said programmes such as nature-positive and zero-carbon meat will underpin its future success and a starting point is getting farmers subscribed to Farm Assurance Plan-plus (FAP+). SFF has signed 600.
He said it captures on-farm data as well as helping suppliers meet the requirements of supply programmes.
Responding to a question about carbon dioxide emissions, Limmer said food producers must listen to consumers and have a brand with integrity and a product that matches their expectations.
“That voice is who we need to be listening to and satisfying.”
Questions were also asked about the benefits of the Shanghai Maling (SM) partnership in SFF Ltd when lamb prices are low.
Chair Rob Hewett said SM supports SFF’s strategy and allows it to control its own destiny and to pick and choose the markets that offer the best returns.
SFF’s strategy reduces reliance on in-market distributors, which he said can be a barrier to suppliers and consumers and disrupt the ability to learn of their needs and how producers can attract premium prices.
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