What's killing the sheep industry, asks
Dunedin Smith, from Shortland Station, and a team of dogs
drive a mob of sheep along the Kyeburn Diggings road
towards Dansey's Pass. Photo by Stephen Jaquiery.
If you put your ear to the wind, the death rattle of the
sheep industry is audible. Sheep numbers have halved over the
last three decades as the best ''sheep country'' is being put
to alternative uses. Who, or what, is killing the sheep
One obvious answer is ''competitive destruction'' by all the
industry players. This is a process where processing
companies compete for throughput. The real answer, however,
lies with the wider failure to understand the fundamentals
that separate successful industries from those that fail.
The dairy industry was no different from the sheep industry a
few decades ago, beset with silo mentalities. The NZ Dairy
Group and Kiwi Dairy Company, at best, resented each other.
This wholly negative attitude focused the industry on the
internal politics between the companies rather than on the
policies that grow the industry.
A form of ''creative destruction'' once dominated the dairy
''Creative destruction'' is a phrase coined by economists
James A. Robinson and Daron Acemoglu. They describe it as a
negative force which attempts to maintain an existing
position within an industry, rather than seeking the
creativity so necessary to keep the whole industry
The changes to the dairy industry driven by John Roadley and
others meant that industry transformed to adopt inclusive
policies demanded by the suppliers who clearly felt a deep
sense of ownership of their industry.
Policies trumped politics for the first time, resulting in a
now inclusive and successful dairy industry. Fonterra's
success is based on this inclusive attitude by the governance
of the industry and from its owner-suppliers, as they focus
on future investment needed to secure their place in the
international marketplace. The dairy industry appeared to
understand that significant change was the vital component in
achieving and sustaining growth of investment in all its
forms. It was not just about farmers' income or new ways of
doing the business but, importantly, it was about the
changing of the political power and influence of the old
guard controlling the industry.
Those negative forces that once dominated the dairy industry
are still hard at work within the once great sheep industry
which is now desperately clinging to a foothold on New
Zealand's second-class hill country.
By comparison with the dairy industry, it is unable or
unwilling to change to meet the international challenges and
competition. Anything new that undermines positions of power
and political influence within the sheep industry is crushed
as firmly today as it was during the wool acquisition debate
of the 1970s. Then, the politics of the industry completely
trumped the policy proposal of ensuring woolgrowers at all
levels had ''more skin in the game''. Instead, we have
competitive destruction combining with creative destruction
to effectively condemn the wool industry to a bit player in
the fibre market instead of the premium position the product
The repression of innovation through self-imposed ''creative
destruction'' allows vested interests to consolidate their
position, power and influence, along with their investment in
old assets and technologies. The recent proposal ( threat) of
grower-dominated Wool Partners to rationalise and amalgamate
the marketing of wool saw an immediate lift in wool prices
during the time of that debate, followed by an equally
immediate fall in prices as the threat of an inclusive
industry fell away.
Yet again, politics rather than wider policy objectives won
the day and is a fine example of creative destruction in
action. The only, but important, role for politics and
politicians is to create the necessary space for the right
policies to take hold, which is the real failure of
successive political leaderships in Wellington.
The sheep industry is, therefore, characterised by a failure
of the entire leadership to identify the forces that lead to
creative destruction. Regretfully, competitive destruction
has almost halved the value of a lamb this year, as the
processing industry claws back its substantial losses,
exacerbating a decline of confidence, just when the sheep
industry desperately needs it.
So many people have tried to re-focus the sheep industry. In
relatively recent years people such as Steve Edge, Lindsay
Smith, Ian Creswell and Keith Milne deserved the support of
all within the wider industry. They didn't get it.
Regretfully, vested interests blocked the attempts to
implement constructive change. The demand for change was not
just about sheep farmers' incomes but about the
implementation of policies needed to grow the wealth of this
That lesson, which the dairy industry seized with both hands
(albeit after considerable debate), seems completely lost on
the sheep industry. Sheep farmers need to take ownership of
policy development and insist on implementation of their
policies. That change can only come by the suppliers taking
decisive and cohesive action.
A counterweight to the processing industry's determination to
hold its position is essential. The entire industry failure
to fully adopt the necessary inclusive strategies is made all
the more unbelievable, given the two major players in the
meat industry are a form of co-operative.
The focus of the ''leadership'' from the old guard is set to
continue their defensive strategies, securing their position
within the meat and wool industries. The authoritarian and
extractive attitude of the sheep industry is a deliberate and
fateful decision of the wider industry leadership.
Who or what is really killing the sheep industry?Actually,
it's the sheep farmers themselves. Their continued support
for ''a dollar on the day'' and believing that dagging a shed
full of lambs is more important than policy development, has
allowed the politics of the sheep industry to bring creative
destruction almost to an art form. The suppliers of meat and
wool to the exporters and processors hold the key to policy
direction. They must take the ultimate responsibility. The
sheep industry is a perfect example of creative destruction
and indeed ... why industries fail.
• Gerrard Eckhoff, a former Act MP, lives near