Two of NZ’s biggest agricultural companies remain working through a dispute mediation process, but with one of those parties optimistic an outcome will soon be reached reports Business Day. Silver Fern Farms chief executive Keith Cooper yesterday said he hoped the mediation would successfully resolve differences between SFF and PGG Wrightson in the next couple of months. Early last month Dunedin-based SFF agreed to PGG Wrightson’s mediation suggestion over a failed partnership deal via a former High Court judge Robert Fisher, QC.

At the time Silver Fern Farms said there were widely differing views held by the legal teams looking at how to resolve the fact that Christchurch-based PGGW defaulted on the $220 million deal with the Dunedin meat processor. Originally it was stated the process was to be concluded by April 18. Cooper yesterday said that date was not binding and talks continued, describing them as “work in progress” with no real deadline. However, he hoped the matter would be wrapped up within two months with dealings between the parties and their advisers “very amicable”.

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This season’s lamb kill is running well ahead of where it was at this time last year, and seems to confirm predictions the kill will taper off and the final tally will be 23% lower than last year reports the ODT. But there was concern there could be another high ewe kill, with figures showing that to the end of January it was running 6.5% ahead of the same time last year. The figures also confirmed the forecast kill of 20.4 million lambs compared to 26.5 million last year.

The mutton kill was higher than expected, even taking into account the massive liquidation that occurred last year due to changing land use and drought.  Some meat companies have reported their cull cow kill to be 85% ahead of last year.

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Hostilities have broken out between two of the country’s biggest agriculture companies over a defaulted $220 million deal reports Business Day. Silver Fern Farms  has rejected as “grossly inadequate” PGG Wrightson’s $10m compensation offer after it defaulted on a $220m deal.  Silver Fern Farms chief executive Keith Cooper  said that amount had been discussed and PGGW knew it was unacceptable. Cooper said the dispute could “potentially lead to litigation”.

NZ’s biggest meat processor Silver Fern Farms is asking its banks for a waiver after the falling dollar caused it to breach a banking covenant reports the NZ Herald. The company said it was following accounting practice relating to its foreign currency hedging.”As a result of this, and due to the recent rapid decline of the NZ dollar against the US dollar, Silver Fern Farms has advised its banks that it is not currently in compliance with its minimum shareholders’ funds covenant.”

Chief executive Keith Cooper said the non-compliance had nothing to do with business funds and the company had not breached any earnings covenants. “No one foresaw such a drop [in the dollar],” Cooper said. “It’s nothing to do with cash flows or anything like that, it’s essentially a non-cash item. It’s purely a hypothetical what-if measure at month end.” The Dunedin-based co-operative had requested a waiver from its banks, which were considering revising the covenant to accommodate such volatility.

A sharp fall in the price of beef has prompted Silver Fern Farms not to activate its November Backbone beef supply contract. International beef prices have fallen 25% in the past six weeks due to a higher United States beef kill and market reaction to record prices which peaked in July at nearly double the average for that period. Prices have returned to more usual levels writes the ODT.

Silver Fern Farms (SFF) last month launched its new flagship lamb, beef and venison contracts to link specific markets and their requirements with suppliers and supply periods. Under the agreement, farmers have the benefit of 12-month pricing, being able to lock-in in advance prices for a portion of livestock and guaranteed killing space. But six weeks of sharply declining prices prompted SFF to not activate its beef and bull beef contract offered in November.

Contracts for lamb and venison, also released in November, were operative. Chief executive Keith Cooper said prices for the coming year were calculated in October, but changing market conditions meant that to proceed would effectively mean SFF was underwriting returns and guaranteeing values for farmers.

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Meat appears to have so far missed the worst of the international economic crisis. Meat companies remain upbeat about prospects for lamb especially, with in-market prices 15% to 18% higher than at the same time last year because of lower volumes, along with an exchange rate more sympathetic to exporters reports the ODT.

 SFFs chief executive Keith Cooper told farmers at a suppliers’ meeting at Finegand this week that he remained confident lamb would not be affected by the economic meltdown. While the restaurant and food service sectors were struggling, with fewer diners, that had been offset by an increase in retail sales as more food was bought to be cooked at home.

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The meat industry merger plans may be on hold, but Silver Fern Farms is changing how it operates. Its governance structure is up for review. The supply programme is being extended with locked-in future prices, and transport costs will be paid for by the processor.

 The former PPCS cooperative also intends to market itself as a global food brand. Discussion in the Pareora plant yesterday saw supplier farmers accepting the need for change writes The Timaru Herald. Chairman Eion Garden and chief executive Keith Cooper discussed possible governance changes as outlined under the proposed, but failed, partnership with PGG Wrightson. Mr Garden asked for feedback on options such as a smaller board or a mixed board with farmer-elected directors, shareholder-appointed directors and independent directors. Another possible change was a shareholder council.

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Silver Fern Farms will pay the full cost of livestock cartage for its suppliers in the SI from Dec 1 reports The Southland Times. Keith Cooper said the change would create transparency in the South Island where some companies had been using cartage payments as inducements to supply stock.

Mr Cooper said the change would: Ensure best practice management of all livestock transport including assurance of animal welfare standards. Reduce costs as a result of co-ordinated livestock cartage management. Improve supply chains from farm to processing facilities. Reduce the carbon footprint.

He said the North Island model was proven, so it was logical to be consistent across the whole country. “Overall it’s about efficiencies and cost savings, which translate into better profitability for our supplier partners,” he said.