Red meat industry behaviour assessed

The way farmers sell livestock and the market behaviour of meat exporters have been identified in a new report as two areas hindering the performance of the red meat sector.

Deloitte partner Alasdair MacLeod yesterday released an interim report on a new red meat sector strategy, saying he sensed a new willingness to co-operate to make the industry more economically viable, sustainable and competitive with other land uses.

"The farming community and processors are both committed to making a change," he said.

The report, commissioned by the Meat Industry Association and Beef and Lamb New Zealand, has initially identified three areas needing to be addressed: livestock procurement, especially the role of stock agents and third parties; in-market behaviour of exporters; and variable farm performance.

Mr MacLeod said using stock agents and other third parties distorted market signals to farmers, as they were influenced by factors such as throughput while adding costs which, he said, exceeded any benefits.

He recounted the story of one farmer interviewed for the study who was horrified when he realised how much he was paying an agent to draft his lambs. The farmer had since negotiated a much more favourable deal by dealing directly with his processor.

"The pricing signals they predominantly get are driven by processor efficiency requirements rather than market signals."

The study has reiterated the long-held view that in-market competition between exporters for market share drives down prices.

Mr MacLeod said research had not discovered any market where competing sellers of a commodity, where price was the only differentiation, had driven up market prices.

Meat Industry Association chairman Bill Falconer said precedents already existed for exporters collaborating to service markets, and he did not expect the strategy to prescribe how they tackled specific markets.