Meat industry should restructure in good times - CEO
Updated at 8:01 pm on 28 January 2013
A senior meat industry executive says calling for rationalisation when meat companies and farmers are under pressure is the wrong time to do it.
Keith Cooper, chief executive of Silver Fern Farms - the biggest meat processor and exporter - was responding to comments by Federated Farmers president Bruce Wills.
Mr Wills has predicted that a combination of plunging lamb prices and heavy financial losses would force meat companies into much talked about restructuring measures this year.
Mr Cooper says meat companies paid too much for lamb last year, driven by competition to get stock. He believes current prices, which are well down, are a truer reflection of market prices and demand.
However, Mr Cooper also says that there are too many companies competing for stock and one of the obstacles to tackling that is that farmers like the competition.
"If there wasn't the current over-capacity or number of meat companies participating in the industry, we wouldn't have the level of competition.
"I personally believe many farmers enjoy the current environment, unfortunately, where they can seek competition for livestock. Now that's not a sustainable model, yet it is one that farmers support.
"You could also argue restructuring the industry covers the whole sector. Now, why do we have Federated Farmers, Beef and Lamb, MIA and other organisations representing farmers and funded by farmers - why don't we restructure them into a single entity and get the efficiencies?
"Equally, one could argue look at the land. Why don't we have bigger land holdings? More corporate-style models, more Landcorp-style models where we get efficiencies and economies of scale?
"Efficiencies and economies of scale is really what people are talking about in the meat industry and it's a moot point about how much would be saved by having less processors."
Keith Cooper says the focus on rationalisation needs to be at the marketing end, not supply and processing, and having a co-ordinated strategy to create more value from meat products in the marketplace.
The time to have a rational debate is not when the industry is under pressure - as it is now - but when conditions are going well.
"Why do we always discuss restructuring the meat industry when the prices are down? Why didn't we just have this discussion when values were higher over the last two seasons and be rational and non-emotive?
"But once again, on the back of a downturn in market returns for very valued reasons, we focus on restructuring. We need to restructure in the good times when people have got a clear head, are unemotive and there is money to invest in that restructuring."
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