Informed vote on meat merger imperative

Pine needles are used for paths between the raised beds. Photos by Gillian Vine.
Pine needles are used for paths between the raised beds. Photos by Gillian Vine.
Gerrard Eckhoff sounds a note of caution over the proposed meat industry merger between PGG Wrightson and Silver Fern Farms.

The latest rescue package for the meat industry has been greeted by many sheep farmers with cautious optimism along with a healthy measure of scepticism by some.

The wider industry is bedevilled by self-interest, protectionist or silo mentalities which have cost the sheep industry dearly.

A statement by Owen Poole, chairman of Alliance Group, that Alliance has the best brands in Europe, is a case in point.

Silver Fern Farms (formerly PPCS) also tell farmers that its brands are the best. Both are wrong.

The best brand is "New Zealand Lamb", yet the two large co-operatives continue to believe in their own rhetoric and that, divided, we farmers stand a better chance of survival in the international market place.

The offer by PGG Wrightson to buy 50% of Silver Fern Farms (SFF) is, in reality, the only lifeboat afloat as the sheep industry sinks, so it is little wonder many farmers want to grasp the lifeline offered.

The $220 million offer may well be a very fair one but the question as to why the SSF board, after deciding to seek outside capital, did not call for wider expressions of interest for a 50% stake in the company remains unanswered by the board.

Silver Fern Farms has a turnover of $2 billion so the offer by PGG Wrightson of $220 million effectively allows the purchase of a controlling interest in New Zealand's biggest meat company, for 12c in the turnover dollar.

That seems like a fire-sale price to many sheep farmers, but it also speaks volumes as to the ability of Craig Norgate and Tim Myles of PGG Wrightson.

Farmers will await with interest an analysis/advice from the one non-farmer or independent director of SFF.

The SFF chairman, Eoin Garden, says the proposal should not be seen as a financial bailout.

That view will be greeted with some incredulity by observers.

If Mr Garden is correct, then he needs to explain why he does not simply invite Mr Norgate and Mr Myles on to the board of SFF for their undoubted expertise, but without the cash.

Much of the rationale for the merger presented to farmers is the need for year-round supply and the technical assistance PGG Wrightson can bring to ensure this happens.

All that needs to happen to ensure supply during the August-September-October period (the off-season for supply volumes) is for meat processors to ask farmers, in, say, February, to submit a tender price to supply whatever number of stock the processor needs during these months.

The processor then obviously accepts the lowest tender prices until the required numbers are reached.

Whether a merger is necessary to achieve that easily obtained outcome is a moot question.

It is concerning that the emphasis of the merger appears not to be so much about capturing a greater share of the overseas value chain but locking in the domestic supply chain.

At a time when the world is increasingly short of meat protein and with the prices set to rise substantially, the board of SFF offers to sell 50% of the business to a very willing buyer.

That clearly indicates that there is not too much wrong with the industry - just the people currently running it.

If sheep farmers choose to exercise their right to vote on this issue, as they must, they have a duty to future generations to inform themselves as well as possible on all the issues and not just rely on the opinion of vested interests.

Gerrard Eckhoff is a Roxburgh farmer and an Otago regional councillor.

 

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