Wednesday, July 6, 2022

True cost sought for consolidation

The farmer-led group behind a renewed push for consolidation in the meat industry say its major players need to come clean on the true costs involved. The Meat Industry Excellence Group is pushing for 80% of New Zealand’s red meat to be sold through a single company in an effort to boost recent poor returns. Alliance Group chairman Owen Poole has put the cost of such a plan at $600 million. Poole said that amount included up to $300m in plant closure costs and additional funds to buy out the private shareholders of rivals. A flyer handed to the 1000 farmers who flocked last month to a meeting in Gore organised by the group acknowledged some of the costs of restructuring would have to be met by farmers, along with the industry’s banks.

But a spokesman for the group, West Otago farmer Allan Richardson, said farmers wouldn’t be forced into writing an open cheque either.

“The funding has got to be achievable for farmers who have suffered several years of poor profitability,” he said.

Richardson had heard cost estimates for consolidating the industry as low as $300m ns as high as $1.2 billion.

“That’s a pretty big range. These guys know what is happening in their own companies but as an industry what is that cost?

“I don’t think any one company has that knowledge at this stage.”

Richardson said his group wanted more precise figures from the meat companies.

“Farmers need some certainty and that is one of the things that we hope to achieve. And go to the farmers with confidence.”

In the meantime, Silver Fern Farms and Alliance are said to be continuing talks with rivals to create their own model to restore profitability to the industry.

ANZCO chairman Sir Graeme Harrison said his company was involved but the talks were at an early stage.

“They are exploratory discussions about how to deal with industry issues, not necessarily to do with what was talked about down in Gore.”

Harrison said he didn’t back a Fonterra-style near-monopoly and believed a two-company structure was optimal for the meat industry.

Richardson said he wasn’t opposed to the major players working on plans of their own, but he would be worried if the talks didn’t make progress quickly.

“If that talk carries on into next year and farmers get $15-$20 extra per lamb then some of those farmers are going to think that the problem has been solved.

“But structurally nothing has changed.”

In addition, the longer the process was drawn out the more farmers were likely to have walked off their land and the more restructuring costs would be borne by those individuals left farming.

Richardson said his group would push the companies to produce a plan this year if they could agree on one.

He said the group hoped to hold a farmer meeting in Canterbury and two in the North Island this month. 

Related stories: North Island action meetingsFarmers back plan for consolidationMeat industry unity cost put at $600 millionHopes slim from farmers’ meeting

 

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