BRUCE WILLS - CHAIRMAN FEDERATED FARMERS MEAT & FIBRE

Federated Farmers Meat & Fibre is encouraging all New Zealanders to have a traditional Kiwi Christmas this year and serve lamb for dinner as part of the T150 campaign. You can do your bit by encouraging your family, friends and neighbours to also get behind New Zealand sheep farmers and eat lamb this festive season. 

We will face challenges in the New Year but the outlook is not all bad. Thankfully lamb prices are up on recent seasons, the prospects from wool industry re-organisation do appear to hold promise and the lower kiwi dollar is saving our beef returns.

This is our last Rambull for 2008 so I would like to take this opportunity to wish you all the very best for an enjoyable Christmas and a more profitable 2009. Enjoy some time off with your families over the Christmas period. I hope the weather is kind and I wish you all the best for getting closer to T150 in 2009.  

T150 target ‘is by 2013' - A reminder the ‘T150' campaign goal is to achieve $150 for a good mid-season lamb over a five year time-frame. Please remember this 2013 end date when talking to members, farmers, commentators and journalists.  In the meantime we are making good progress in just this season alone and a range of initiatives are to be rolled out in 2009. 

NAIT update - A meeting was held with members of the NAIT Governance Group to discuss Federated Farmers' submission on its June 2007 discussion document. NAIT has agreed to relook at their cost benefit analysis and dialogue will continue on other aspects of the submission. The Federated Farmers' submission to NAIT is now available on the website. 

Circular on Draft Code of Welfare for Sheep and Beef Cattle - a Circular has been sent to members asking for views on this Draft NAWAC/Biosecurity New Zealand publication.  In particular, members' views on the Minimum Standards as published are requested.  David Burt, the Meat & Fibre Policy Advisor, is collating responses after submissions close 15 December. David can be contacted by email on dburt@fedfarm.org.nz or on 04 494 9182, 0800 327 646 or by fax on 04 473 1081. More information about the code can be found here. 

Reclassification of veterinary medicines - As a consequence of legislative changes, veterinary medicines are to be reclassified in the second half of 2009. The medicines will be classed as either "Unrestricted" or "Unrestricted (A, B or C)".  The changes are to be preceded by a road-show and discussion organised by NZFSA to bring vets and veterinary medicine companies up to speed on the changes.  Federated Farmers has been asked to take part in the discussions and anyone interested in attending this should contact Ann Thompson by email on athompson@fedfarm.org.nz or on DDI 04 494 9191, 0800 327 646 or by fax on 04 473 1081.  Ann will advise the dates and locations of the meetings when this information becomes available. 

Meat & Wool New Zealand Director Elections - Nominations for two positions on the M&W Board are being sought. The positions are for the Northern North Island and Northern South Island electorates.  Nominations close at 5pm on Monday 12 January 2009 and must be submitted on the official form that can be obtained from the Returning Officer (Warwick Lampp) on the Election Hotline 0508 666 636. 

2008 Lamb Crop Report - Meat & Wool New Zealand published this document late last month.  It can be obtained from the Economic Service Publications section of the Meat & Wool website. Alternatively, a hard copy can be obtained by contacting David Burt by email: dburt@fedfarm.org.nz or 04 494 9182, 0800 327 646 or by fax: 04 473 1081.

Conference highlights

Seven high calibre guest speakers delivered interesting addresses on three key issues facing farmers.  Those being the economy, the meat and wool industry and the National Animal Identification and Traceability project. 

Doug Steel, Senior Economist, Westpac Institutional Bank, spoke about the microeconomic environment in "The World in Crisis: Implications for Sheep and Beef Farms":

• The financial crisis was bad for producers as demand is reduced.  This has seen a massive policy and market response, locally and internationally
• Decreased farm gate returns are being offset to some extent by the fall in the NZD
• There is positive news for New Zealand in the longer term.  Demand from emerging markets will drive New Zealand economic growth along with trade reform, such as the CAP and Doha
• Medium term risk remains as an economic recession could stall trade reform and see increasing protectionism.

Ganesh Nana, Chief Economist and Editor, BERL Forecasts, Business and Economic Research Limited, gave a macroeconomic perspective in his presentation, "The 2008 Collapse of the World's Financial Markets:  Where to now for New Zealand":

• While the present problem was a financial market one, it was inseparable from 'real world' production based systems
• The Achilles heel of the New Zealand economy is the current account deficit; New Zealand is still living beyond its means
• New Zealand has poorly managed the critical issues of economic development and productivity growth for some time
• Future growth needed to see increased investment in infrastructure and people. 

In keeping with Federated Farmers T150 campaign, the next four speakers gave their views on the state of the New Zealand wool and meat industries:

Theresa Gattung, Chair, Wool Partners International Ltd, spoke on developments around "Wool - the fibre of the Future":

• Recent low strong wool returns are a consequence of a fragmented industry and internal competition.  Wool faces competition from a heavily promoted synthetic carpet market such as that in the United States
• There are huge opportunities in the commercial sector in the United States leveraging off consumer health and environmental concerns
• New Zealand wool is to be positioned by Wool Partners as a premium luxury product
• There is a need to work with the strongest US manufacturers/retailers to achieve this market position. 

Mike Petersen, Chairman, Meat & Wool New Zealand, provided a sector overview in "Sheep and Beef Sector Update - Markets, Policy Implications and Other Industry Issues":

• The setting up of the Wool Industry Network and confirmation that no farmer levies are being channelled into the establishment of Wool Partners International, or its promotional activities
• MWNZ believed the future for New Zealand meat farmers was bright despite current economic uncertainty
• Given the impact of decreased sheep numbers on meat levy income, MWNZ will look carefully at its programmes giving priority to market issues
• MWNZ believed NAIT was primarily a food safety and traceability issue; maintaining market access was essential

The Commodity Levy Act Referendum process was outlined. 

Alan McDermott, Team Leader Agribusiness, AgResearch Limited, provided a historical perspective of the sheep industry in "Sheep Meat Industry Performance During 1980 - 2007":

• The industry had been structured on a seasonally based production system and had been highly successful in transforming itself
• A number of factors influenced processor behaviour, including cut-throat procurement, competition and spot market relationships with producers.  There was some cooperation amongst industry with Some processing companies developing value chain alliances with farmers
• The industry faced many challenges such as the lack-lustre performance of wool and the need by both producers and processors to service debt.  Innovation, both on and off-farm, was another issue
• Processing was now deregulated but needed to match capacity to supply; labour remains a challenge.

This topic was both extended and personalised by the next speaker, a senior industry figure:

Graeme Harrison, Chairman, ANZCO Foods Ltd, discussing, in depth, "The Evolution of the Modern New Zealand Meat Industry: An Insiders Observations":

• The meat industry was New Zealand's most competitive industry
• Farmer choice had determined the industry structure that was now in place
• New Zealand meat companies were in reasonably good shape
• Two major challenges facing the industry are livestock supply and the availability of labour
• Any meat company seeking to closely connect with customers must invest in the supply-side; this was difficult as no futures market existed to lay off risk
• Competition remains fierce.

The last speaker for the day was Ian Corney, Chairman of the NAIT Governance Group, who provided an update on the very topical issue of NAIT - the National Animal Identification and Traceability Scheme:

• To date, all meetings held with producers had been generally supportive
• The rules of access to the NAIT database would be determined by the NAIT governance body; strong farmer representation on this body is crucial
• At some stage in the future, Mr Corney thought sheep would be included, but he was unsure about the type of tag that would be used for sheep
• An indicated price for the additional tag cost was provided as well as an ‘off the record' disclosure as to indicative costs per carcass at slaughter and per kilogram of milk solids for dairy.

Julia Hoare, Partner-in-charge of PricewaterhouseCoopers' New Zealand Climate Change Services Practice spoke on "Carbon Trading and ETS":

• The issue is important from a trade perspective as consumer pressure is likely to increase
• The proposed New Zealand system is different to other countries, not being a cap-and-trade system
• New Zealand legislation is modelled on taxation legislation and carries severe penalties for non-compliance
• Farmers need to understand systems in order to prepare processes before it commences
• Some New Zealand businesses are going to have a source of credits off-shore - any such credit must be ETS compliant
• Estimates are only available from MAF around the projected shielded and unshielded effects on farming operations
• ETS compliance does not mean carbon neutrality.

James Parsons reported on some of his findings from his recent Nuffield Scholarship trip in "Supply Chain Dynamics, Why Farmers are Price Takers":

• Inefficient supply chains with mistrust and poor communication is rife
• Huge efficiencies are to be had if New Zealand developed a 'whole chain' focus; control of information will be a key aspect as this provides a lot of power
• Producers need to act collectively via a farmer owned cooperative if they wish to get out of the price trap they are in.

Jeanette Maxwell, the Meat & Fibre vice-chairwoman and F.A.M.E. (Food and Agribusiness Marketing Experience) participant, spoke about "Opportunities for the Meat Industry in China":

• It is essential that New Zealanders' who wish to do business in China recognise the importance of building strong and trusting relationships at various levels over a long period
• Businesses in China are a combination of complex sophisticated operations and old-fashioned operations
• Meat is an expensive luxury with small packaged portions.  New Zealand products are either not evident or packaged in such a way as to not appeal to Chinese consumers.

Matters for Action

Motion passed - "The Meat & Fibre Council endorses Federated Farmers' submission to the NAIT Governance Group."

Matters for executive action - To closely monitor the Government's Emissions Trading Scheme review; to develop Meat & Fibre strategy; and to continue the T150 campaign.

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If you have any questions or comments about matters raised in this newsletter, contact a member of the Meat & Fibre council or policy advisor David Burt 0800 327 646, dburt@fedfarm.org.nz.