Meat companies are bracing themselves for a late flurry of lambs as favourable growing conditions over most of the country create a grass market. Processing plants have been working short days because of the slow flow of prime lambs, but Silver Fern Farms chief executive Keith Cooper was confident the forecast number of lambs available for slaughter would be reached reports The ODT.

He said the abundant grass was affecting the flow of lambs from both store suppliers and finishers. There had been a noticeable increase in kill numbers in the past week, he said, and as autumn and winter drew near, farmers would be keen to quit their stock.”We do know stock will come over a period of time, but the risk associated with that is the influx of stock will not be in sync with markeplace requirements. It creates a production-driven model.”

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The chairman of the country’s largest meat company is urging farmers to take a long-term view of their industry and reject one-off price inducements from companies wanting their stock. Silver Fern Farms chairman Eoin Garden said with prime lamb prices back sharply from last season, the obvious kneejerk reaction from farmers was to take the best price offered for their stock on the day.

But, he warned, that ignored the need for the sector to make long-term structural changes which could only come by farmers supporting companies which were taking a long-term view, reported Meat Daily.

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South Canterbury freezing works are cutting hours as lamb numbers dwindle. Low lamb numbers have forced freezing works to reduce hours for the past month reports The Timaru Herald. Silver Fern Pareora and Alliance Smithfield in Timaru are operating between 20 and 30 hours a week. Alliance Smithfield employs 475 people while about 730 work at the Silver Fern Pareora plant.

“It’s rather unusual for this time of the year as we’d normally expect to be busier,” Alliance Smithfield plant manager Dick Allen said. Mr Allen attributed reduced workflow to low demand for stock kill and because many farmers were electing to put weight on stock before it went to sale. He said lamb shortages were affecting other plants across the South Island and was not sure how long it would go on.

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Silver Fern Farms (SFF) is in no-man’s land on its road to plate to pasture reports Rural News. “We’ve validated the strategy and we are making good gains,” chief executive Keith Cooper told about 100 shareholders who packed into the company’s AGM in Gore last week. But there is still a long way to go to implement the integrated supply chain strategy, and commitment and tenacity are needed to complete the transition from the historic procurement and processing focussed model, he says.

“We want to make our money by being smart, nimble and highly competitive… We are in no-man’s land right now.” Cooper says it is not the cooperative’s aim to be the biggest processor and it is “unfortunate” it is. As such, it has had no choice but to engage in the current lamb procurement battle, not just to fill processing plants but to meet customers’ orders for Easter.

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Supermarkets have a limited ability to raise the retail price of lamb, a buyer with one of the world’s largest retailers says reports The ODT. Sam Pearl, the chilled-lamb buyer with British supermarket company Tesco, told farmers at a sheep and beef forum organised by SFF in Gore last week that, individually, supermarkets were small players in marketing sheep meat.

Several farmers told Mr Pearl that unless farm-gate prices for lamb improved, there would be a further decline in the number of lambs available for them to sell. Mr Pearl stressed it was not in the interest of Tesco for farmers not to make money. The solution to farmer profitability was for supermarkets, processors and farmers to work together to extract more value through developing new markets and doing things in a different way.

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A lack of rebate, the chief executive’s salary and poor lamb prices fuelled the debate at Silver Fern Farms’ annual meeting in Gore. However, chairman Eoin Garden was not surprised by the comments that led to more than two hours of discussion. “When lamb returns drop there is a lot of tension and criticism and suppliers play the market. “But when we had high returns last year, we heard from no one,” Garden said.

Garden agreed it was a challenging time for lamb suppliers with the global recession impacting on key markets and the volatile currency driving down sheep farmers’ returns reports The Press. Several of the 120 shareholder suppliers at the meeting voiced their concerns about Silver Fern Farms’ decision not to pay a rebate last year. It would have come as a welcome relief for farmers who have faced a drop of more than $20 per lamb this season.

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As cooperative Silver Fern Farms’  annual meeting looms its shares are trading at barely half the $1 issue price of last spring’s capital raising.
Last week a parcel of 16,562 changed hands for 54c/share following a deal at 50c on January 7. At 54c/share the company would be worth just $44 million. “Obviously it’s a very discounted valuation and it’s based on a very thin trade,” chief executive Keith Cooper told Rural News.

Since the shares were first offered on Unlisted on October 27, 60 transactions have seen 411,444 shares traded, 0.5% of the 81.4 million shares issued. The price fell rapidly after an initial transaction at $1, touching 50c for the first time in early November. The price recovered to 65c before hitting a low of 47c in December. Last week shares were being offered at 60 to 90c, with bids from 51 cents down to 20 cents. Whether the share price is a topic for discussion at the annual meeting in Gore next Wednesday will be down to shareholders. “There are no specific agenda items, no specific announcements, so it’s just an open discussion,” says Cooper.

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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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