Fed Farmers Meat & Fibre chairman's address to AGM

SPEECH

Keith Kelly
Chairman Federated Farmers Meat & Fibre

9AM WEDNESDAY 24 JUNE 2008

ONE EVENT – MEAT & FIBRE AGM
RYDGES HOTEL, CHRISTCHURCH

Chairman’s Address

June was one of the more positive months in farming in the past three years. There is light at the end of the tunnel in some areas and increasing darkness in others.

On the positive side, several years of wool woes are finally being addressed. The fighting between Wool Equities Ltd and the Wool Action Group compounded by legal proceedings over the rapidly reducing Wool Board Disestablishment Company (DisCo) money, left Meat & Wool New Zealand little or no choice but to pull any monies that might have gone WEL’s way out of contention.

The recent announcement that DisCo will pay an undisclosed sum back to qualifying growers has at least closed the books but we await the final figure to show us what the costs have been to the supporting wool growers. The formation of the Wool Grower Holdings has given us some hope although, little detail, around the future of the industry. Strong wool now has a future as long as the industry gets in behind and shakes itself out of its lethargy and remembers it is strong wool inclusive not just Romney wool.

The second positive for the industry was the long awaited National Animal Identification and Tracing group announcement. The Industry/MAF Biosecurity 65/35 funding split with further incentives down stream has to be positive for our industry. The recently released biosecurity discussion document gives us a tight time frame to comment in, with 1 August 2008 the cut off date. Federated Farmers of New Zealand is a member of NAIT and this will give us a voice at base level to ensure costs to farmers are kept to a minimum. As with Wool Grower Holdings, NAIT still has a few bugs to iron out to provide us with a system that benefits beef and deer farmers and exporters and is also a significant asset in terms of biosecurity management.

The third positive factor is the Meat Industry Taskforce announcement about the process it is undertaking to formulate a sector strategy for the red-meat industry in New Zealand. We keenly look forward to both the consultation process around this issue and to the final report.

Looking ahead, it is timely to note that meat and fibre producers represent not only beef, mutton and lamb farmers but also producers of deer and goat meat as well as wool and other fibres. All these sectors contribute to our budget and each section must be represented fairly. Recently, we seem to be putting all our resources into lamb.

The Meat Industry Action Group has done a sterling job, going around the country initially on the unjust procurement contracts that were in vogue two years ago, then moving on to aspects of the mega-merger concept and global lamb trade areas. Many MIAG members have put in their own time and money trying to weld the mainly South Island co-operatives into a single unit to procure and sell lamb efficiently and profitable so that they, the shareholders get a fair return. It should be acknowledged here that Federated Farmers has also contributed financially to these struggles. By my estimation, Federated Farmers of New Zealand has put in some $10,000 of members monies into this battle, with most of this coming from your provincial coffers.

The Meat Industry Taskforce is funded by Meat & Wool New Zealand levies which spreads the cost across all farmers in the red-meat industry. The taskforce acknowledges “the lack of profitability for the sheep industry in particular needed attention and all segments from supply, processing and through to marketing needed to make improvements”. We need to be careful however, that industry structure does not become divorced from industry strategy. In this respect, Sir John Anderson has, quite rightly, requested farmers and companies to allow the taskforce to complete the strategy work that is needed. This will provide the framework that will allow informed structural discussions to take place.

Along with you, I keenly await the sector strategy paper in some ten weeks time. For our industry to go forward the strategy will need the support of all participants. As Sam Lewis of AFFCO said, we need the South Island co-operatives to get their act together before we can look to roundtable discussions. The only way we will get all parties together is when everyone can sit at the table and achieve a win-win situation.

As noted above, Meat and Wool New Zealand collects levies on behalf of all farmers and they act as an ‘industry good’ body in regard to meat and wool research on behalf of New Zealand farmers. It is pleasing to see them working proactively to address challenges the industry faces.

Federated Farmers, as a lobby group, advise Meat & Wool of our members concerns and the direction in which we want to go. The next step must be to set the direction of the spending, a matter that will be addressed in the upcoming Commodities Levies Act referendum. Farmers need to be clear about what they want this body to achieve, particularly in regard to the marketing of our red-meat industry products. Critical issues such as marketing need appropriate programmes to be adequately resourced and implemented and vacillation about when or how Meat & Wool New Zealand should be involved in this area is counter productive to success.

Meat returns appear to have turned the corner, with future prices for lamb and beef along with other red meats on the rise. Beef is up 21 percent, lamb 34 percent (a 15kg lamb up to $4.39/kg from $3.83). We are told the average price for lamb will reach five dollars over the next five years and bull beef will be up 20c/kg. In other words, we, yet again, enter another boom-and-bust cycle. This is not good enough. The industry taskforce must give us long-term profitability and sustainability. If the economists are right, we may well be getting $100 for a finished lamb and, if our production costs remain around the $55 mark, we can make inroads into our debt loading.

Farm costs are not standing still however and are rising rapidly. For example fertilizer costs have substantially increased recently and consequently it is likely that less fertiliser will be used in future. The effects will be seen in reductions in live weight gains and quality grassland reversion.

In addition, the Environment Waikato/Lake Taupo variation 6, if passed in its current form, will significantly reduce stocking rates and require the removal of stock over the winter months. Horizons proposals will also have far reaching affects on farmers and these schemes and others – such as the retirement of 1.2 million hectares of hill country - will have a flow on effect to the rest of New Zealand.

The biggest problem of all however, could be the emissions trading legislation already through the first stage of the select committee process. By my calculations this legislation would see the average New Zealand farmer running at a substantial loss.

To survive as farmers in New Zealand it appears we must give up our land, pay excessive rates, taxes, high interest - all for the common good, and for no benefit to farmers. Never before has there been such a need for the knowledge and experience of our lobby group, Federated Farmers. In a world that is rapidly heading towards starvation we are being led by a bureaucracy that believes food come from supermarkets not farms. This must be changed!

ENDS

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