WorkinWords Comments and occasional rants on agribusiness and other topics – mainly New Zealand

There are occasions when commenting on the current state of the meat industry you might as well skim through one of the many recent company or industry histories. It is déjà vu all over again.

With just about any development or proposal you can flick through the history pages and find an instance to enable you to say that the industry has “been there, done that”.  And almost invariably the outcome was that unless it was something proposed or introduced by one or more meat companies it did not stick.  It has to be their idea; its part of their management style. So they haven’t got the T shirt.

So, much of the action from the Meat Industry Excellence group which generated a lot of heat and light in the media a few weeks ago has happened before (several times in the last 40 odd years) in both the meat and the wool industry.

And if history is anything to go by, the heat will cool and the light will grow dim, particularly if the saga drags on. There could be some marginal adjustments, so the stirrers can claim they had achieved some of the changes they were aiming for. In some instances the radical conservatives will weigh in and vote for the retention of the status quo.

Generally the causes for slow or no change have been either one, or a combination of the following: the inbuilt inertia of the current structure, the recognition by those advocating change that altering the established system is a daunting prospect, or farm gate prices begin to improve. As result the pressure for change diminishes, until the next time.

Those engaged in the industry have a vested interest in protecting their own organisation and their position in it, so any industry restructuring moves by the companies are likely to be marginal and slow. As economist John Kenneth Galbraith stated, “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” It is always easier to show that change is not really necessary.

There have been reports about four major meat companies discussing possible adjustments to improve the industry performance. It is likely that the deliberations are centred on possible collabaration relating to livestock supply and/or processing; after all they are production oriented managers. Marketing collaboration is usually left out in the cold, when it should be to the forefront.

But the resounding silence about the form, content or outcome of these discussions speaks volumes. It is difficult therefore to know whether they are making progress or just stalling for time. A cynic would suggest that if the meat companies can drag the discussions on long enough the new season will be upon them with attention swinging on to different and possibly more urgent issues.

The Meat Industry Excellence group has backed away from their original agenda for a united processing and marketing structure, and their stated aims now read like a wish list largely being left to the companies to implement, rather than an action plan.

Perhaps the MIE have discovered that changing a monolith is a tough ask. Some of the original aims might have required some form of regulation but there is little or no appetite for such interventionist activity these days, so it will have to be persuasion which takes time, and that is in short supply.

Looking at it from the outside there not a lot of urgency, and there is no inspirational or even evangelical leader standing up to lead the charge and beard the meat companies. So anything that happens is likely to be the result of a long winded process and the results could be minor and cosmetic.

To add to these woes some industry commentators are now talking about an improvement in prices for the coming season as a result of shortages from the drought and because of a drop in value of the NZ dollar. There are also suggestions of a lower lamb kill, so there are likely to be shortages in markets that have been diligently developed over the recent past. Will this put upward pressure on prices, again?

If this happens then the momentum for change that has been building will quickly and quietly dissipate. The meat companies will sail on their merry way and everything will be forgotten until next time; just as they have done several times in the past.

This could be construed as shutting the stable door after the horse is five furlongs down the track but I have a couple of concerns about the “Collaboration for Sustainable Growth” (CSG) programme.

The programme received a symbolic seal of approval when farmers agreed in March that Beef & Lamb NZ could dip into reserve funds to contribute the producers’ share of the cost of the scheme.

The CSG is explained on the Beef and Lamb NZ website as follows: “A group of agribusinesses and the government have partnered up to invest in a collaborative programme to drive sustainable, long-terms profits for New Zealand’s red meat sector. All partners plan to work together to support the adoption of best practice behind the farm gate, and between the farm and processor.”

My concerns are that in order to achieve “long term profits for the red meat sector” all of the emphasis is on the producer end of the supply chain. The focus for improvement in productivity is still behind the farm gate with the presumption that farmers have been neglecting their duty to drive for profits in the red meat sector.

For my money, the farmers have done an amazing job of improving on-farm productivity and keeping the red meat sector going in the face of fluctuating weather conditions, inconsistent prices and returns, unfavourable exchange rates, opportunist selling activities, and pressure from bankers and other advisors to convert to dairying or some other capital intensive pursuit. The inconsistency in wool returns and the demise of wool promotion and R&D have not helped, but that is another story.

Despite these adverse conditions, the productivity of the average sheep and beef farm has continued to improve, as shown by the 83% increase in the weight of lamb produced per ewe over the last 20 years. Admittedly sheep numbers have declined but that cannot be entirely related to unproductive farming practices.

In order to achieve the continuous increase in productivity, and despite the fact that they are all operating in a competitive environment, farmers have been quietly collaborating and sharing information on most aspects of best practice behind the farm gate.

Back in the day (as the saying goes these days) the Department of Agriculture used to employ sheep, wool and beef advisors to keep farmers up to date with developments in science and technology that would assist in improving productivity. In this age of self help and private enterprise these officers have gone the way of most MPI services.

Farmers have relied on their own resources, farm discussion groups, field days and just plain sharing of information, which has continued with or without assistance from government agencies. Beef & Lamb NZ have been contributing as part of their farmer funded activities, using current income derived from levies, but now they are going to dip into the reserves.

In essence the farmers have been getting on with information gathering and sharing to maintain a steady improvement in productivity for the past twenty years.

But now the various meat companies and agribusiness groups associated with the PGP schemes have the temerity to propose that farmers spend some of their reserve fund, via B&LNZ, to encourage them to continue to get together to collaborate and share information to keep improving their productivity. It is as if the farmers are the root cause of the problems of the industry.

When did the meat companies or the banks last get together and share information to improve productivity? Will they be using reserve funds or current income to fund their contributions to the CSG?

The outstanding feature of the various PGP projects that have been announced so far is that they have been proposed by individual companies, and there is a strong hint that any benefits derived will be held fairly close to the chest of the company at the centre of the particular scheme. The idea of information sharing to improve the productivity of the processing and marketing sectors is an anathema to them. Collaboration among processing companies has never been their strong suit.

While the four major meat companies claim they have been meeting to discuss possible structural changes for the future meat industry there is little evidence so far of them sharing any of this information with the other stakeholders involved – the farmers.

Farmers react to incentives and the best one is consistent pricing. Not the run away boom followed by three years of austerity while the companies and the banks recover from their excesses. So maybe there should be a move to encourage the companies to collaborate to improve their market intelligence and marketing efficiency.

P.S. I have deliberately ignored the word ‘sustainable’ since I consider it is just another multi-syllable word that has become fashionable, and can mean what I say that it means.