Saturday, March 2, 2024

Alliance beefs up its quota share

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The latest United States beef and veal quota allocations show Alliance is on its way to being a genuine beef player, chairman Murray Taggart says.
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The farmer-owned co-operative has added about 1500 tonnes of quota for the 2020 calendar year on top of the 834/t lift between 2018 and 2019. 

For several years Alliance has been easily the biggest sheep meat exporter but has been more of a bit player in beef with just a third of the business held by Silver Fern Farms and half that of the other two big-four processors, Affco and Anzco.

In recent years it has also trailed Waikato-based Greenlea Premier Meats but has moved ahead again in the 2020 allocations.

“We’ve been concerned for some time that we haven’t been a good performer and it’s no secret that this has been a real focus,” Taggart said. 

“It’s a good rise.”

In the latest annual report he and chief executive David Surveyor said the group recognised it had to lift performance to become a serious participant in beef. The recent launch of the Pure South-brand Hand-picked premium range was a step-change for the business.

Still in it’s early days the shareholder-only programme is based on strict traceability and quality compliance rules and will ramp up further in the next year or two as more farmers become  familiar with it. 

Other marketing initiatives are planned.

As part of its improvements Alliance’s beef plants at Mataura in Southland, Pukeuri in north Otago and Levin in Horowhenua set throughput records in the latest year. 

And all can increase their tallies further, especially Mataura, which can make a significant lift. 

Levin is popping its rivets in the main kill season but can lift production in the off-season, Taggart said. 

Silver Fern Farms continues as the biggest beef exporter, second biggest sheep meat exporter and the biggest meat producer overall. 

Its US beef quota is up about 1000/t in 2020 to 65,363/t giving it 30.63% market share, with Affco at 39,920/t (18.71%), Anzco at 37,968/t  (17.79%), Alliance at 20,774/t (9.73%) and Greenlea 19,245/t (9.02%). Anzco’s share has dropped over the last seven years.

The two quota schemes are still the official measure of meat company market share, even though the allocations are a long way from being filled these days as China has emerged as the biggest individual market for both beef, drawing product away from the US, and lamb and mutton drawing product away from Britain and Europe.

The quotas are based on a rolling three-year production period. 

For calendar year 2020 Alliance has 28.19% of the European Union sheep meat quota, ahead of Silver Fern on 19.06%. Its tonnage is marginally higher than the 2019 figures while Silver Fern’s is marginally lower. Affco is third biggest with a 15.54% share, ahead of Anzco on 10.07%. On tonnage, Affco is slightly down and Anzco slightly up on 2019 figures. 

The big four players have a combined 72.86% of the quota.

Hawke’s Bay businessman Craig Hickson has major interests in three companies, notably Ovation NZ and also Te Kuiti Meats and Lean Meats, which between them have a 10.56% share of the 2020 quota, pushing the top five grouping to just above 85% of the total.

Taggart said market share is not the big story for the sheep industry because declining sheep numbers is the dominant issue. 

“You’re trying to maintain your share of a smaller bucket and that’s got implications for any player.”

Government policies providing incentives for alternative land use such as extensive tree planting mean the hefty investment in fixed assets makes all companies vulnerable. 

“We don’t sit there wondering if we’re in front of or behind anyone else. We’re always looking to see what our capacity is and have we got the right number of animals for that.”

Alliance is vulnerable to the impact of major tree planting in Southland as other companies are to major plantings in other regions.

Alliance, 100% farmer-owned, and Silver Fern, with the processing business now 50% owned by a farmer co-operative and 50% by China’s Shanghai Pengxin, are traditionally the major meat companies by market share.

Silver Fern’s leading share of the US beef quota has been relatively consistent since the 31.66% share in 2006 though it dipped to just over 26% around 2010 before recovering well by 2013.  

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