Beef + Lamb New Zealand Annual Meeting 2013

8 MARCH 2013
FOR IMMEDIATE RELEASE

Beef + Lamb New Zealand Annual Meeting 2013
Chairman’s Address

It is a pleasure to be here in Wanaka and to be able to welcome you to the 10th Annual Meeting of the farmer owned organisation Beef + Lamb New Zealand.

We are also delighted to be here at the Upper Clutha A&P Show alongside our now famous competition, the Glammies, in our quest to find the best tasting lamb in the land. The competition is fierce, but one thing is for sure. All of the finalists today are producing the quality world renowned lamb that New Zealand farmers are famous for.

Can I also acknowledge our fellow farmers in drought regions across much of New Zealand. The season to date has been extremely challenging for nearly all of the North Island and the upper half of the South Island in particular. On our own farm we are seeing the driest seven month period in over 50 years, with no rain in sight. Farmers in general have responded quickly and appropriately to growing drought conditions, however lasting damage will remain. The economic cost will be spread over many years, but the human cost is the biggest concern. Make the effort to look after your friends and neighbours during these challenging times.

In my address at last year’s Annual Meeting in Poukawa, Hawke’s Bay, I talked about the evolution of Beef + Lamb New Zealand over nine years – from a statutory board into the farmer facing organisation that is here today. I also talked about the volatility facing the sector, and the likelihood this would continue for the foreseeable future. And I talked about progress in the Red Meat Sector Strategy, and the need to do more.

Today I would like to expand on this as Beef + Lamb New Zealand continues to evolve and we see the passing of yet another year.

Before I tackle those three themes it is important to look beyond the issues of today, and reinforce the opportunities for our sector in a hungry and more discerning world. Through all of the current market and economic issues, the consistent view is that those in the business of food production remain in the box seat for future prosperity.

This optimism will be cold comfort for those facing drought and a collapse in meat pricing well below the levels companies indicated earlier this year. However our focus on your behalf at Beef + Lamb New Zealand is to continue to look through the pricing issues today, and provide tools to build a better future for the next generation of farmers.

The long-term opportunities are real, however we are at a critical junction in our journey as a sector. The message from farmers loud and clear is that you want action to turn around the precarious situation we find ourselves in.

The volatile returns for farmers and industry over the past few years are a real threat to our industry’s future. There has been plenty written and said about the collapse in lamb prices, to a level that is now unsustainable for even the best farmers in our sector. Our own Beef + Lamb New Zealand Economic Service forecasts released this week predict a halving of profits for the current year in the face of falling farmgate returns and rising costs.

In the context of better returns from other land uses, farmers are questioning whether this industry has a future. Judging by the numerous phone calls and emails to me, the mood and lack of confidence among farmers is worse today than we saw five years ago after three years of low lamb pricing.

Let me give you my frank assessment of the situation we find ourselves in today.

On-farm productivity gains over the past 20 years have outperformed every other sector in New Zealand. However the industry as a whole is not performing at the level required to enable a prosperous and vibrant sector.

Confidence is a key component for investment, both in infrastructure, and in people. We need to provide more stable and higher returns if we are to attract and retain the best and brightest.

In this regard, higher returns need to be an urgent priority for those responsible for selling our products to onshore and offshore customers. However it is not the whole equation, and on farm there is still much that can be done to assist in this transformation.

The Red Meat Sector Strategy is now nearly two years old. It was developed by Beef + Lamb New Zealand alongside the meat industry to provide a framework to identify the areas where real progress can be made for a more profitable future. We have consistently stated that the strategy is not a blueprint. However the three themes identified in the strategy are a framework that remains as relevant today as when it was launched nearly two years ago.

The Primary Growth Partnership (PGP) discussion under way today addresses one of the three themes in the strategy, and in particular the one where farmers have the greatest influence to be able to lock in better long-term profitability. We have never claimed this is the complete answer to the industry’s issues, but doing nothing in this area is not an option.
Let me touch on the PGP some more, and the issues that have been raised throughout the process.

The development of the PGP programme – Collaboration for Sustainable Growth – alongside our industry, banking and professional partners is a crucial component to wider adoption of best practice on farm. Never before has the sector come together in such a manner, focused on one common goal. We are currently seeking approval to use existing reserves to contribute the 30% of funding needed from farmers to enable the programme to proceed. But without the Red Meat Sector Strategy, this collaborative effort and the funding support from the Government would not have been achieved.

There has been enough discussion about the proposal over the past few weeks. However the consultation phase has provided an opportunity for farmers to have their say on the state of the industry today. Most of the discussion at the meetings has not been directed at the programme itself, but at the wider issues facing the sector – and in particular, perceptions about the performance of the processing and exporting sector in New Zealand.

In the meetings up and down the country we have often found ourselves defending the performance of our industry partners. I know about much of the good work the meat companies have been doing in recent years, and the new programmes under way. Company involvement as partners in the PGP programme is very important and we welcome it.

However the perception among farmers is that most of the incredible productivity gains they’ve made over the past 20 years have been frittered away by companies competing in the market here to buy, and then competing in overseas markets to sell.

It is not the role of Beef + Lamb New Zealand to talk about the work of meat companies. However the request from farmers has been clear. We have been told unequivocally that farmers want to hear for themselves of the gains companies have made in the procurement and market areas. Not in ‘PR’ speak, but real numbers of real gains that are making a dollar difference to returns to farmers. Perception becomes ingrained as reality, and right now the perception that companies are doing nothing is becoming folklore. In our meetings with the Meat Industry Association we have reinforced this view. However I need to reiterate the message from farmers here today. This story needs to be told.

A large number of farmers have requested we hold back funding the PGP programme until they see evidence of progress in the other two areas of the Red Meat Sector Strategy. We remain convinced that doing nothing is not an option. The gains for farmers out of this programme are potentially significant, and will go a long way towards providing a more stable future. Importantly, more progress on farm will accelerate the gains for farmers with progress in the other sector strategy themes.

So what does all this mean for your organisation, Beef + Lamb New Zealand?

Beef + Lamb New Zealand is merely an extension of you. Owned by farmers, guided by farmers, and governed by farmers as your vehicle for collective investment in the future of farming. Our strapline says exactly that and encompasses the way we think and operate: By farmers. For farmers.

I talked earlier about the evolution of Beef + Lamb New Zealand over the past nine years. Implementing a successful PGP programme will accelerate this transformation again as these projects become embedded as ‘business as usual’ priorities for future years. This is a very important point and one we should not underestimate as farming jumps to the next level of performance. I do not for one moment agree that the productivity gains over the past 20 years will not be repeated, and this is why your organisation needs to lift the game, to help you keep up.

So where to from here for our sector as we sit at those crossroads I referred to earlier?

The Red Meat Sector Strategy outlines the size of the prize. Farmers and industry partners are picking up the challenge with a capital injection to take on-farm performance to new levels.

The other themes in the sector strategy need to be progressed much further than they are today. Beef + Lamb New Zealand can’t lead this work, and it is important for farmers and companies to work together to drive the improvements needed here.

There has been some good work in the areas of processing and marketing, but much more needs to be done. Importantly, companies need to tell this story better.

Collectively, farmer suppliers, shareholders and the other owners of meat companies need to address the competitive procurement situation that will only get worse in this coming season. Excess capacity may not seem to be an issue for us in drought areas today, but it is real and needs to be addressed.

Ladies and gentlemen, there is an elephant in the room.

A simple merger of the two cooperatives as suggested by many is in my view not enough, but today I am calling on companies to address this area once and for all.

Farmers are increasingly demanding change away from the status quo. We have been told that even if there is not one dollar for farmers for a period of time after an industry reorganisation, they need to see some options on the table to give them confidence for the future.

If we do nothing, nothing will change. And that is the very point of all of the work I have talked about today. If you are happy with today’s profits, then do nothing.

In closing, I would like to thank all of the many organisations that we interact with as we go about the business of working for farmers. In particular, with our colleagues at Federated Farmers, Young Farmers, our sister organisation Beef + Lamb New Zealand Inc, Primary ITO, AgResearch and Massey and Lincoln Universities, we have key components in getting the right results for farmers. We have an incredible team of people working on your behalf and we owe them thanks as they passionately go about their business for you.

I would also like to acknowledge all the people working for you in Beef + Lamb New Zealand over the past year. From your Farmer Council members, your staff on the ground, your management team in Wellington through to your board of directors, we have real people doing their best on your behalf, every day.

Finally, as we go home to the challenges on the farm, try to look through the haze to the long-term prosperity that is promised if we all do our part to seize this opportunity. Plan for the future with confidence.

We owe it to the next generation of farmers.

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