In parallel with that there is the ANZ-sponsored talk show telling farmers they need to get their act together behind the farmgate.
I disagree with that.
While there are efficiencies farmers can always improve on it is not farmers who are responsible for low returns, it is the processors.
Blaming farmers is, in my view, a red herring designed to prop up corporate failings.
It is important to acknowledge, though few in the corporate world would, that farmers have increased productivity over the last decade well ahead of any other sector.
Now the smoke has cleared over the Silver Fern Farms deal it will be fascinating to see how that affects prices.
It will also be interesting to see if the rumours regarding Shanghai Maling renegotiating the price paid for its slice of SFF are true.
As I’ve written previously, I don’t give a fig who owns the processors. All I’m interested in is getting the best price for my produce at the farmgate.
Australian farmers get better meat prices than we do and they don’t own the vast majority of their processing industry.
Ownership is irrelevant, price is everything.
With all that in mind, you could have knocked me down with a feather when I read the front page of last week’s Farmers Weekly.
Alliance is ready for a procurement war, it said.
Taggart said there were the right grounds for a procurement war.
That is crazy talk and wouldn’t sit well with Alliance’s conservative suppliers.
Procurement wars are short-term stimulants where the ultimate loser is the farmer. There is no future in Alliance even contemplating a procurement war.
It will also be interesting to see if the rumours regarding Shanghai Maling renegotiating the price paid for its slice of SFF are true.
Mind you, farmers beating up on farmers isn’t new. Just consider the old PPCS Richmond debacle. It appeared largely ego-driven and was probably the beginning of the end for PPCS, now Silver Fern Farms.
The main loser in that internecine shambles was, again, the farmer.
What is important to consider is that the issue with any procurement war is that it won’t be farmers beating up farmers but farmers taking on the Chinese government with all the resources it has.
My view is that it is a dispute that Alliance hasn’t a chance in hell of winning and even talking procurement wars is ridiculous.
The parent of Shanghai Maling is Bright Foods. It is wholly owned by the Chinese government.
Bright Foods is a huge conglomerate in its own right with fingers in many pies.
It has 80 different brands over 30 different categories in supermarkets.
It markets most of the products you would expect to find in a well-stocked pantry.
It also has more than 500 retail outlets in China alone.
Alliance, by comparison, is a minor bit player.
It doesn’t have the resources to fight a skirmish, let alone a battle or a war. I just don’t understand the rhetoric.
What has Alliance or more importantly its shareholders got to gain?
It seems somewhat perverse to me that in the same edition of Farmers Weekly we had Alliance actively talking prices down.
We read that while chilled Christmas lamb would fetch $6 a kilogram, later lamb could fall to $5.20 then further fall to $4.80.
In addition, they admitted that they’d got prices wrong last year.
I’d have to say those statements wouldn’t fill me with confidence if I was an Alliance supplier.
Considering the overall picture, Alliance, with the exception of Levin and Dannevirke, is an operator in the south.
Sir Graeme Harrison recently said he wasn’t interested in starting up there and Affco has just two plants in the south, Invercargill and Burnham.
As Affco has seven plants in the North Island, in the event of any procurement war in the south, it could well leave SFF and Alliance to slug it out.
As I understand it, the company has secured its lamb supply by contract, paying a premium to do so.
The rhetoric of a procurement war was stupid for another reason.
As I wrote in Farmers Weekly in December if the new owners of SFF want to take out Alliance they could easily start a procurement war.
That would either starve Alliance of livestock or bankrupt them. SFF now have the resources to do just that and there would be nothing Alliance could do.
What that would achieve would be to give Shanghai Maling two meat processing co-operatives for the price of one.
It would also enable them to set the prices they wanted in the south after Alliance had disappeared.
My view is that the outlook for southern farmers isn’t good.
