Meat sector must change: MAF

There are renewed calls for the meat industry to change the way it operates but little expectation it will happen.

A Ministry of Agriculture and Forestry discussion document released yesterday said the industry could potentially be a world leader of high quality, sustainably grown meat that matched consumer demands, but it warned there was little desire to make the substantive steps needed to achieve that.

"Collectively, the opportunities identified describe the potential for a vibrant sector that places New Zealand at the forefront of high-quality, sustainably produced meat, rewarding farmers for meeting consumer expectations in both traditional and new markets."

The report indicated there was still little appetite for significant change, despite challenges remaining from international competition, loss of traditional finishing country for animals, environmental concerns from consumers, capital constraints, lack of marketing focus, domination by large retailers and farmers wanting flexible supply arrangements.

"The overall impression is that respondents . . . are largely only confident in predicting small, incremental changes . . . This does not rule out the possibility of more radical changes . . . but most respondents considered change of this nature less likely."

The study followed two years of failed industry attempts to instigate mergers and partnerships and to change the way it operated.

Productivity improvements had enabled the industry to stay competitive, but the report said the sector's future relied on creating more value for its products rather than competing on price and cost reduction.

Respondents had a vision for the sector in 10 to 15 years as economically and environmentally sustainable, investing in innovation, with a greater focus on the market and more co-ordinated.

Meat companies suffered from a lack of capital, an inability to invest in innovation and a competitive culture and structure designed to maximise throughput.

There was little incentive for farmers to invest in co-operatives, which owned half the sector, because share values did not increase in line with the company's performance.

The report said there was conflict between suppliers and processors over the supply of stock.

Processors benefited from long-term supply contracts, but needed short-term incentives to procure on the spot market to maximise capital utilisation and access to quota markets.

Farmers were reluctant to commit large numbers of animals on contract because of variable weather and a preference to supply stock as pasture growth allowed.

This was an area where the sector could become more aligned and returns improved, but farmers did not appear to prioritise the prosperity and success of co-operatives.