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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In a press release Silver Fern farms announced they are to drive growth of lamb in NZ supermarkets with a  innovative range of cuts. NZ’s top quality lamb cuts that would normally be found in premium restaurants and European supermarkets will be available to local consumers ahead of Christmas as Silver Fern Farms shifts its focus into local supermarkets..

 As part of its strategy to capture value across the entire red meat value chain, Silver Fern Farms is forging a stronger domestic footprint with four key lamb products – boneless leg roast, loin fillets, rumps and stir fry – which will shortly be available in NZ supermarkets. It’s a major directional shift for the country’s leading procurer, processor and marketer which traditionally exports 95% of its product into more than 60 countries.

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Silver Fern Farms has defended the payment of premiums for certain breeds of lamb, saying the market paid more for certain animals which met certain criteria reports The ODT. Farmers have criticised the meat co-operative for paying farmers a 10c a kg premium for Primera-bred lambs supplied under contract to Marks and Spencer, but Silver Fern Farms said to qualify, the lambs had to meet standards demanded by the supermarket chain.  SFF livestock manager Grant Howie said lamb breed was just one criterion demanded by Marks and Spencer.

Suppliers also had to monitor their carbon footprint, greenhouse gas emissions, land management impact and have plans for the environment, quality assurance, animal welfare and food safety, he said. “This is the old market averaging model versus the new integrated-market led model. When it comes to the Marks and Spencer programme, there is more value in the total programme than an average market programme.”

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You’ve got to hand it to Silver Fern Farms. The farmer-owned meat co- operative has gone from villain to hero in recent years reports Stuff. Not so long ago, when it went by the uninspiring moniker of PPCS and was upbraided by the courts for underhand takeover tactics, it had an unsavoury reputation. But over the past year or two that has changed. With the new, more marketable name has come a new business strategy that seeks to control the product from the farm though the supply, processing and marketing pipeline to the retailer. It’s a system that embodies the catch-phrase “pasture to plate”. Silver Fern is not the only NZ meat company doing this, but it’s the biggest and at the moment it’s doing it the best.

That’s because it has pulled off a couple of important deals lately. The first is to supply French grocery co-operative Intermarche with Silver Fern-branded chilled lamb. It is believed to be the first time French supermarkets have agreed to allow branded lamb from NZ – until now it has been sold under the supermarket’s own brand.

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Angry shareholders confronted the board of loss-making fledgling firm NZ Farming Systems Uruguay wondering if they were ever going to see the returns they were promised reports Stuff. At the company’s annual general meeting in Auckland yesterday, shareholders, many of them farmers, grilled directors and management about the firm’s farming practices and intentions in Uruguay. Chairman Keith Smith said he was confident it would recover due to a recent increase in dairy prices, performance of pasture under irrigation and development of the Uruguayan farming talent.

The beleaguered PGG Wrightson subsidiary predicted a return on capital four times higher than the NZ average in its 2007 prospectus. But since then it has had consecutive losses, and now says it will not break even until 2011. Buoyed by the dairy boom, the firm bought more land than it had planned to in its first 18 months for conversion to NZ -style pasture-based dairy farms. Then came the credit crunch, milk prices collapsed, and Uruguay was hit by a one-in-30-year drought in the last financial year, which led to significantly lower milk production and higher irrigation costs.

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Silver Fern Farms faces an unenviable decision about what to do with its 10 million shares in rural servicing company PGG Wrightson, which have halved in value since being issued in April reports The ODT. The shares were part of a $49.6 million settlement package from PGG Wrightson (PGGW) for failing to complete last year’s partnership with the meat co-operative, but since then the value of PGGW’s shares have fallen from $1.20 to 62c.

Craigs Investment Partners broker Chris Timms said lurking in the background was the possibility PGGW could have a rights issue to attract some desperately needed fresh capital. While the company has not announced plans to do so, Mr Timms said it had few alternatives to improve its debt equity ratio.

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