Alliance Group has no intention of altering its policy of accepting ram and cryptorchid lambs up to twelve months old. Results of the farmer owned co-operative’s study during the past year confirm there is no difference in the eating quality of the meat from 17kg-19.5 kg carcaseweight  entire, cryptorchid or wether (castrated males) lambs reports Country-wide.

As a result, Alliance will continue to make no distinction between carcases of different sexes or castration status in its lamb schedule or the contract supply options it offers its shareholder suppliers. Provided they are in the required and preferred weight ranges, payments to Alliance suppliers will remain the same regardless of whether their lambs are male, female, wethers (castrated males) or induced cryptorchids.

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Too many competitors in the meat industry as well the high dollar are being blamed for low lamb prices. A high NZ dollar is blamed for poor prices offered to sheep and beef farmers, yet it has not stopped Fonterra lifting its payout forecast to $6.05/kg milksolids. Unlike Fonterra, meat companies appear to do very little hedging. One industry source said meat companies did not hedge because they could let farmers take all the risk reports Country-wide.

If the concept for a super meat company promoted two years ago had been successful and held 80% of the supply then it could have locked in prices in the 60 cents range like Fonterra. They also said British supermarket Tesco had been in NZ recently knocking on meat company doors. Several meat companies, a large processor and a medium-sized one, had caved in to Tesco, accepting a lower price to get quick turnover of product. If other meat companies manage to hold markets and price then the deals with Tesco by the two companies could backfire.

Silver Fern Farms’ Lambplan programme is offering a guaranteed minimum payment of $1.85/kg liveweight (LW) for store lambs through until the end of February. This could change if the dollar moves. The situation is being reviewed each week. Farmers who take on the lambs to finish for Lambplan have been offered $1.30/kg LW, down on the $1.60/kg LW paid last year.

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Silver Fern Farms has emerged from its 2009 financial year in buoyant mood, justifiably claiming a vastly stronger balance sheet and substantial progress towards the goal of transforming itself from traditional sales driven meat processor to market led food company reports Alan Barber in his blog. It is also pleased with the capital restructuring programme which reduces redemption risk, enables it to attract outside equity and provides the chance to trade shares, while introducing an enhanced governance structure.

 All these developments have happened in spite of global uncertainty, the collapse of the attempted sale of half the company to PGG Wrightson, and the obstinately high dollar. So under the circumstances, it’s important to do an objective assessment of just how strong the company’s operating performance was, whether the improved balance sheet can be sustained, and how achievable long term the transition to market led food company really is.

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The country’s two largest meat companies are investigating sourcing lamb from Uruguay to supply their markets outside the New Zealand lamb season. Silver Fern Farms management visited the South American country about three months ago and Alliance officials were there recently, with company representatives understood to have met Uruguayan farming leaders reports The ODT. However, it appears the two southern South Island co-operatives were working independently on the project, potentially adding further to meat industry fragmentation and competition.

With New Zealand sheep numbers falling 9.9% and 3.4% respectively in the past two years and markets demanding year-round supply of chilled lamb, companies have had to start looking elsewhere for supplies. It is understood Silver Fern Farms (SFF) was looking at forming alliances with Uruguayan farmers rather than following the model of New Zealand dairy investor New Zealand Farming Systems Uruguay (NZFSU), which has bought 20 farms and was converting them to New Zealand-style dairy farms.

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Invercargill-based Alliance Group has recorded an operating surplus of $42.1 million from a turnover of $1.5 billion for the year to September 30. It will make an extra payment of $15m to its farmer shareholders related to the livestock they supplied, as well as pay a 5c full imputed dividend, worth $2.8m, based on share holdings reports The Southland Times. A bonus issue of 18.6 million shares is also planned this year so the company’s farmer owners can share in its growth and receive a larger share of its equity.

Chairman Owen Poole said the company had recorded a strong profit and provided “very good returns” with lamb prices at record levels.”It is somewhat unfortunate that we reflect on a successful year at a time when an unhelpful New Zealand dollar looks set to undermine returns in the year ahead,” he said.

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Alliance Group expects to pay shareholders $15 million in rebates this year, within the $10 to $20 million annual historic range.  Speaking to about 100 shareholders in Milton yesterday, chief executive Grant Cuff said the rebate payment was over and above its yield quality premiums paid for lambs which met its yield target reports The ODT. In a low-key meeting, Mr Cuff was bullish about prospects for sheepmeat, beef and venison, saying markets were generally strong, the world wanted our meat and the only blight on the horizon was the exchange rate.

At current levels of over $US65c to the New Zealand dollar, Mr Cuff said January to March prices for all three species would be about 10% less than last season. Alliance chairman Owen Poole said the company would be meeting suppliers to its two North Island meat works in coming weeks and inviting them to become shareholders. They company bought its first works at Dannevirke in 2003 and had just three North Island shareholders. He said the approach was designed to get a commitment to the company from its other suppliers, while the capital injection “would be useful”.

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The lamb kill hit a hole in March, but southern meat companies remain confident there is enough stock to meet their requirements reports The ODT. In the year to March 30, the total kill was 14.1%, or 2.5 million, below the same period last year but the kill in the month of March was 28% lower than March last year. The season was on track for 6.1 million fewer lambs to be processed this season as forecast by M&WNZ Economic Service. Companies moved earlier than normal in the season to align processing capacity with livestock availability, but Mr Howie said SFF expected to have enough stock committed to meet its late and out-of-season requirements even though fewer lambs overall were available. SFF’s winter lamb plan had successfully extended the season, he said, which was also helped by an abundance of autumn feed.

Alliance Group chief executive Grant Cuff said his company killed more lambs early in the season than expected, which he said would be felt by lower numbers in April and May. But numbers available from June to September would be similar to other years. Because the early-season kill was high, Mr Cuff said some markets questioned if the predicted shortage of lamb actually existed. With the sudden slow-down in March, Mr Cuff said they were left in no doubt.

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South Canterbury freezing works are still looking at a May finish for the lamb chains reports The Timaru Herald. Low lamb numbers have seen the three freezing works operating on reduced hours for the last month. It is likely to be a similar story through to the end of the killing season. Alliance’s Pukeuri works manager, Danny Hailes, said the two remaining lamb chains had had a couple of non-kill days and there had been some “short-hour” days. The plant had not operated as many six-day weeks as it had last season. The lamb chains usually worked to the end of May and at this stage it was looking likely they would operate through to early May. The beef processing plant had been running double shifts since early last month.

Staff are still on reduced hours at Alliance’s Timaru Smithfield plant. Plant manager Dick Allen said, the plant was still operating about two-thirds of normal capacity.The situation had not changed in the last month with most staff losing a day’s pay each week.Staff were still working shorter hours because of the low number of stock being killed, meaning pay reductions of about 30 per cent.No change had been made to staff numbers, but the reduced kill was affecting the pay packets of about 380 of the plant’s 470 staff.

At the end of February the lamb kill was down 11 %  in the South Island and 8 % in the North Island. Last year’s drought was blamed for the reduced stock numbers.

Farmers need to resist the temptation to grow lambs out to heavier weights, despite strong product prices, because they are not what the market wants reports Country-wide. While in the past two years there have not been the same penalties for heavy lambs, Alliance Group livestock manager Murray Behrent says the animal of choice for the market has a carcaseweight of 17.5kg-19.5kg. These carcases give a better consistency of product and produce a 1.8-2kg leg, which is the perfect size for the European market.

Behrent says as processors they can happily handle lambs from 14.5kg upwards, and can also sell between 10-12% of lambs being at heavier weights of 19.5-23kg, but they need the majority of the lambs coming through at 17.5-19.5kg. Once processors send a signal to farmers that they will pay you good money for 23kg lambs, farmers will respond by pushing lambs up to that weight. “So what happens? “You take the tonnage of meat from 14.5-19.5 up to 22kg, you crash the market that can handle those lambs and then you have got between 17.5-19.5, which is where you best market is and there are no lambs to supply.” So Alliance is paying around $3-$4 less for a 22kg lambs than for a 19.5kg lamb.

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Farmers with dwindling feed options should act now to take advantage of an abundance of feed in other areas. Southland farm consultant Ivan Lines says there has never been a better time to take up share- farming deals with the meat companies or with other operators. Alliance livestock services manager Andrew Mackie says farmers should not wait until the lamb condition starts to drop because it takes too long to recover when they do finally move to quality feed reports Country-wide. “They are like a wet facecloth. All the goodness has gone out of them and takes a long time to soak up again.”

Silver Fern Farms’ Lambplan is offering $2.40/kg liveweight gained. Alliance is offering $2.20kg LW, but the farmer shares the profit with grazier. With the surplus of feed in Southland there is a stand-off between graziers and dairy farmers over prices. When brassica crops went in the ground the expectation was for prices well above $30/head/week. Graziers believe at $5/kg MS the price should be still closer to $30.

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