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“Reclaiming Our Industry”

“Reclaiming Our Industry”

Speech to the NZ Meat and Fibre Producers’ Council

By Keith Kelly, Chairman

10.30am, November 28, 2007

Copthorne Hotel, Wellington

 

Today, I could stand here lament the future of our industry. But what would be gained by that?

We know the issues we face – they are not new.

Instead, I am going to stand as a farmer leader to talk to farming leaders and issue a challenge – a challenge to members of the Meat and Fibre Producers’ Council and the 8,500 Federated Farmers’ members we represent.

The challenge is reclaim our industry.

We must work as a team. That’s what Federated Farmers has done with its Resource Management Act campaign.

We started this campaign two years ago. We have come up with answers to problems with the Act and how it is implemented. We have taken these problems, commissioned independent research, listened to farmers’ stories, and worked out solutions. These have been developed into the ‘six pack’ of necessary changes.

These ideas have been taken to government and have been received with thanks. We are still in the process but hopefully we can look forward to a positive future in which farmers can work with a greatly improved RMA.

Correspondingly , as sheep and beef farmers, we face an industry that is not ‘well implemented’ and so, likewise, we need to listen to you, identify the problems, devise and communicate solutions to  the farming industry, the processors and other stakeholders that make up the wider industry.

In a nutshell, as sheep and beef farmers we lead the world. Our quality of product is second to none. But, sadly, our economic returns are second to many.

First, the dollar plays a huge part in our economy. Better financial brains than mine have failed to stabilise it at a level that rewards exporters.

The affect of the high dollar on our industry is massive

Has the marketing format of our meat products around the world led to unsustainably low returns?

We have a gilt-edged advantage in the European Union market, thanks to our hard earned quota, yet we fail to shine.

One factor is the powerful British supermarket lobby. It has grip of steel on the meat market and no doubt plays a major part in our lacklustre performance.

There is a mountain of product held back by Britain’s foot and mouth problems.

When the current outbreak is cleared there will be a deluge of British lamb on to the UK and EU markets. Every trick in the book plus a few more will be used against New Zealand lamb.

There are too many street traders on a very short street.  We need co-ordinated marketing.

Our Minister of Agriculture, Jim Anderton, offered to help us overcome the red tape that envelopes this aspect of trading, yet we still procrastinate and delude ourselves that “she’ll be right”.

The marketing of products is a highly skilled exercise. Balancing current market needs and forecasting potential new markets tend to go hand in hand with high costs.

It is a basic fact of economics that just because we spend big dollars we do not automatically receive big dollars. You only have to look back at the old Wool Board’s and Meat Board’s balance sheets for this to be blatantly obvious.

Turning to the wool industry, we invested heavily in the McKinsey & Company report. This had a high dollar return for some, but regrettably not for us the farmers.

Certain areas of this report were taken up and some sections of the wool industry have prospered. But the coarse wool aspects were largely ignored.

We have also invested many millions in the Wool Industry Network. This Meat and Fibre Producers’ Council gave Mike Petersen, Chair of Meat & Wool New Zealand, three years to use it or loose it. Mike has lived up to his promise and WIN will release its stage two findings this year. We will have to wait to read the WIN report before we can comment

Never has an industry been more in need of a boost both to its confidence and its future.

The last remaining dollars of the Wool Board’s millions were locked up in the disestablishment company DisCo to clear up remaining legal issues, before they could be paid out to growers.

Continuous legal action, claim and counter claim, coupled with fees and wages have left us with what?

Reading between the lines there may be enough to pay for the stamps to send out a small return on a billion dollar investment. On the positive side the High Court recently ruled that enough is enough, stop the legal ping pong and pay the men and women to whom the money rightfully belongs

If given the choice of money or shares in WEL, what choice will you make?

Should the money be invested in WIN? 

It is easy to gain attention by standing on a soap box and pointing your finger. I am always reminded that if you point one finger at someone, three
So what can we do to help ourselves?

That ladies and gentlemen is the theme that runs through this council meeting. We need to be a team and work together. Over the next two days we will take steps to regain control of our industry

What do we need to take into consideration when planning the future of our industry?

First, look long and hard at the forthcoming Commodities Levies Act referendum.

Before agreeing to levies to be collected and administrated by Meat and Wool New Zealand, understand the thinking behind the levy proposals.

We need to look at ways that we can mutually benefit from levies. We need to be involved in the planning and agree on the best way both practically and economically to guide our industry forward. All registered farmers will be consulted but WE are the Voice of Farming.

A round table discussion is better than a cross table argument.

Second, we need to decide on a position in regards to bovine Tb. Are we in favour of abandonment, eradication or containment? The pest management strategy is to be formally reviewed in 2009. We need to be clear about our need in this area and the funding we are prepared to commit to it.

 

Is the Animal Health Board empire building or is it on the right track?

 

Third, the lamb industry, to say the least, is troubled. The mainly South Island co-operative based system and its procurement methods are under close scrutiny.

 

The only way forward is for farmers and their processing companies to go forward together, not separately.

 

If a works closes, what is the cost to the farmer – one or two dollars more on the transport bill? Or is there an overall improvement in payment and efficiency.

 

Both farmers and companies have associated costs and in some cases high debt loading. Under such circumstances whose debt should be paid off first; the company or farmer?

 

Wouldn’t it be best if we adopt a common sense approach for the good of all?

 

The great New Zealand lamb company merger did not eventuate. A decision by Alliance directors stopped the merger, as I understand PPCS  wanted to continue merger discussions.

 

What’s our stance?

 

We are developing a splinter group society. Each group is pushing its own barrow, usually with a directorship in it. Such groups make the job of meat and fibre producers difficult.

 

When things go wrong, we are asked to help bail them out or support them. This council represents all areas of New Zealand. We work for the good of all farmers. Let’s remember that and communicate.

  

We need to consider the demand for the release of the PricewaterhouseCoopers findings as they relate to the PPCS/Alliance merger. Should it be given to shareholders ‘as of right’, or recognised that its release would have major negative commercial impacts on the companies concerned.

 

Fourth, we have to end ‘taxation without representation.’ Too often our industry group is not represented on committees and working groups that are vital to our industry. Who moved the goal posts?

 

We must get recognition of Meat and Fibre Producers as a practical, knowledgeable group that should be part of the process that develops the way forward for New Zealand agriculture – especially in matters that directly affect our industry

 

As an example of this, we need to drive the National Animal Identification and Traceability project to completion. If we fall behind in this key area, we will lose markets and valuable profit.

 

I would like to discuss this issue in more detail. There are several instances where the lack of an effective traceability system has cost farmers dearly.

 

We have seen the effects overseas of the very costly international outbreaks of BSE, foot and mouth, and blue tongue. Yet New Zealand sits on its hands and debates how to develop the perfect system for all animals in the food chain.

 

This council is trying to make progress.

 

At our annual meeting in July, we endorsed RFID (radio frequency identification) for cattle as a first step. (The National Council watered it down to “in principal”)

 

Financial drivers must be a prime concern. We know consumers all over the world are demanding more information about the food they eat, as well as farm gate to plate traceability.

 

Why is there pressure to impose a $3-$4/head tag system on sheep for individual identification? This is financially unworkable and completely impractical for sheep farmers.

 

Is it needed? Who is driving it? We as a council agreed that RFID of cattle comes first. Let’s get that system up and running, iron out the bugs, and then bring in other animals in the food chain as and when we need to.

 

Has the NAIT program been high jacked by bureaucrats in search of perpetual job renewal?  Why the delay?

 

Finally, at the One Event we started the taking control process by passing three key remits:

 

1. That farmer owned co-operatives have a transparent and fair livestock procurement system that does not reward volume supply.

 

2. Farmers demand greater co-ordination between New Zealand meat companies marketing our lamb, to improve price, promotion, and research and development.

 

3. That farmers and companies commit themselves to livestock supply contracts as a way to move the industry forward.

 

These remits have since been formally adopted as Federated Farmers’ Meat and Fibre policy.

 

In regards to remit two about co-ordination, we wrote to the Meat Industry Association and copied it to Meat and Wool New Zealand to detail Federated Farmers’ expectations around marketing and product development.

 

At a meeting between Federated Farmers and PPCS senior management, PPCS recognised the importance of these issues and took action to address them. However PPCS will continue to reward volume supply.

 

Federated Farmers is seeking to meet with both PPCS and Alliance chief executives together to express the concerns of our members about the industry, and to begin a dialogue with the aim of generating improved returns for sheep farmers.

 

I am not forgetting the North Island companies and intend to hold similar discussions with them.

 

In closing, we know that clear thinking and practical cost-effective systems are vital to the future of farming.

 

Some people would have you believe that the industry is becalmed and rudderless, drifting in the doldrums. We are not in the doldrums, more like the eye of a cyclone

 

Our industry is facing stormy weather.  Working by ourselves, some farmers in our industry will not survive.

But working together in the Meat and Fibre team, we can weather the storm and emerge stronger.

 

ends

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