Three seek two Silver Fern Farms positions

Fiona Hancox.
Fiona Hancox.
Meat industry restructuring is a wider issue than just the merging of the two co-operatives, Silver Fern Farms chairman Rob Hewett says.

Mr Hewett, who farms in the Manuka Gorge, is seeking re-election to the board along with fellow incumbent director Herstall Ulrich, while West Otago farmer Fiona Hancox is also standing. Two positions are available.

Silver Fern Farms had been public about the need for industry rationalisation, so far, to little avail.

It remained open to a merger of the two co-operatives should Alliance Group wish to engage, Mr Hewett said.

At Alliance Group's annual meeting in Gore last month, chairman Murray Taggart said there were ''sound commercial reasons'' why a merger with Silver Fern Farms was not realistic.

Mr Hewett said Silver Fern Farms remained committed to discussing ''sensible'' rationalisation options with any industry participant.

It was worth noting livestock suppliers had always been able to determine their processor of choice and the company with the best strategy should win their supply ''everything else being equal'', he said.

Herstall Ulrich.
Herstall Ulrich.
In recent debate about industry restructuring, there had been a clear focus on the two co-operatives needing to merge to achieve scale, in ''the Fonterra model'', with farmer ownership and control, Mr Ulrich said.

That was something Mr Ulrich, a former Meat Industry Action Group member, originally stood for and still believed would give efficiencies of scale.

But the notion that would also achieve better returns from the marketplace was ''somewhat flawed'', he said, citing the current volatility in milk prices which Fonterra, with its global scale, had not been able to avoid.

The best way to achieve sustainable, improved returns from the global marketplace was with a value-creative strategy, being consumer-focused, and delivering branded products.

The board was open to discuss any industry rationalisation proposals, the obvious being with Alliance Group.

It would take co-operation from all parties to achieve that goal. Meanwhile, the company must push ahead with its strategy, Mr Ulrich said.

Ms Hancox said it was a ''crucial time'' for farmers to remain engaged in co-operative issues and work towards a reformed industry structure that could turn around industry decline and provide sustainable profitability.

She was a founding member of Meat Industry Excellence but resigned to pursue election.

Farmers were ''really hurting'' and concerned for the viability of their businesses, she said.

Tough weather early in the summer, coupled with meat schedules falling again after a brief respite last year, put many sheep farmers under ''real pressure''.

The focus at Silver Ferns Farms must be to return the co-operative to sustainable profitability, underscore co-operative values, and provide pricing transparency.

Loyalty needed to be rewarded and the company's debt-equity ratio needed to be improved.

The industry was not working well when prices were now about $10 a lamb above the cost of production, she said.

Analysis done by Geraldine farm consultant Peter Clark estimated the cost of producing a lamb averaged $85.

''Even at Beef and Lamb New Zealand official 2014-15 estimates of $103 per lamb, the top 20% of farmers were predicted to be returning only a slim 2.5% on investment.

"Shave $15 per head off that figure and even the best farmers will be struggling to achieve anywhere near sustainable levels of profitability,'' Ms Hancox said.

The co-operative model had not been given its best chance of success because of the divided industry.

A new, consolidated co-operative could make a difference, she said.

Voting papers will be posted to eligible shareholders on January 28, with voting closing on February 13.

The result will be announced at, or prior to, the company's annual meeting in Dunedin on February 18.

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