Red meat sector needs to get past survival mode: report

A long-term perspective on New Zealand's sheep and beef sector will enable the industry to move beyond survival mode and focus on maximising its potential - rather than ''looking jealously over the fence at dairy''.

A report on the red meat sector published in KPMG's latest edition of Agribusiness Agenda said there should be ''no room for infighting'' or talking down the industry.

Strong leadership would be critical to establish a new era of engagement, collaboration and trust-based relationships, to enable the industry to succeed through a variety of different routes to market.

While the concept of a ''red meat Fonterra'' met with little support from industry leaders, the majority involved in the roundtable discussions recognised the industry needed to continue to evolve.

Some potential options, if sector participants were prepared to take a long-term perspective, included consolidating processing assets to create an open-access processing entity.

That was floated as a way of securing overhead cost reductions, which were estimated to be between $300 million and $500 million a year, while enabling the industry to cement the efficiency benefits of scale.

There were many challenges to implementing consolidation, not least the cost of rationalising existing capacity.

There appeared to be reasonable consensus about the cost benefits that could be realised and returned to processing companies and the farm gate.

Some leaders said the industry was unlikely to progress without one or more international partners being attracted to invest in the sector.

The parlous state of the wool sector was a key challenge to sheep farmers' viability.

With the crash of wool volumes seen over the past six months, achieving a turnaround became increasingly challenging, as supply shortages were driving short-term market behaviours.

There had been much talk about red meat sector reform, yet limited change in the past 12 months, and a key theme was farmers having lost confidence.

However it was important to avoid generalisations, as there were many industry participants who were delivering ''exceptional results'' from their businesses.

There was no quick fix to rebuild belief among farmers. It required a shift in culture that needed to be driven by all in the industry.

It was noted that some progress was being made to facilitate cultural change, with initiatives like FarmIQ and the Red Meat Profit Partnership being identified as ''important steps in the right direction''.

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