Are capacity utilisation and processing costs part of the beef problem, and if so, what is the solution?

I have previously analysed GHD’s data on capacity utilisation and processing costs in the sheep industry [SFF’s sheep processing dilemma]. These GHD data underpinned the major MIE recommendations in their recent report. However, whereas MIE focused on the need for amalgamations, I showed that the crucial evidence was the exposed position of Silver Fern Farms relative to other processors. The overall cost leader was Ovation, which lies outside the ‘Big Four’.

Here I analyse the beef processing costs to see if a similar story emerges.
The simple answer is that for beef, as with sheep, there are big differences between the industry cost leaders and the rest. Once again, Silver Fern Farms appears to be one of the laggards, but it is not there by itself. Continue reading

Posted in Agribusiness, Meat Industry | 1 Comment

MIE report exposes Silver Fern Farms’ sheep processing dilemma

Meat industry reform is back in the news in recent weeks with the long awaited release of the Meat Industry Excellence (MIE) report. The MIE perspectives have been well known for some years and so there were no real surprises in what they said. According to MIE, the most important issue is dealing with industry over-capacity through plant rationalisations and company amalgamations.

I will return to MIE’s solutions at another time, but here I want to look at the underpinning analyses provided by international consultancy company GHD, and some key insights therein that could easily be lost. When it comes to finding solutions, losing those insights would be a great pity. For Silver Fern Farms in particular, some of those insights make uncomfortable reading. Continue reading

Posted in Agribusiness, Meat Industry | 7 Comments

Is China’s infant formula market about to see a price crash?

A Chinese language report on WeChat –China’s popular social media platform – indicates that the Chinese infant formula market is about to become a lot more price competitive. According to a usually reliable Chinese industry website, the New Hope Nutritional Foods Company is about to introduce a new line of products called ‘Akarola’ which will come from New Zealand and sell for less than one third the price of similar products.

New Hope already has a New Zealand sourced brand called ‘Akara’ which is manufactured and canned by Canterbury-based Synlait. Linked to this, Synlait announced in late 2014 that it was taking a 25 percent share in New Hope Nutritional Foods and that this would create an integrated supply chain from farm to consumers, in line with Chinese Government regulations. Continue reading

Posted in Agribusiness, China, Dairy | 5 Comments

Can green-lipped mussels be the next heavy lifter?

[This post first appeared in the Fairfax NZ Sunday Star Times, and on Stuff, on 22 March 2015 under the title ‘Green-lipped bounty all ours’.]

If New Zealand is to double agri-food exports by 2025 in line with Government targets, then we are going to need some lateral thinking. We won’t get there just by doing more of what we have been doing.

Related to this, in recent weeks I have been giving thought as to whether the green-lipped mussel can be one of the heavy lifters that can get the job done for New Zealand.
The green-lipped mussel is indigenous to New Zealand. The species is found nowhere outside our coastal waters. It is easily identified in the shell by its distinctive emerald green colour. The flesh is also distinctive from other mussels. Continue reading

Posted in Agribusiness, The Fairfax SST Articles | 2 Comments

The Sauvignon revolution

[This post was first published in the Fairfax NZ Sunday Star Times on 15 March 2015, and online at  stuff.co.nz,  both with the (inaccurate) Fairfax-chosen title ‘Analysing wine’s cash harvest’.]

Last week I drew attention to the New Zealand Government goal of doubling agri-food exports between 2012 and 2025. I pointed out that our success over the last fifteen years has been fueled by product price increases, and that we cannot rely on the next decade being so fortunate. So how are we going to make the quantum leap that we need?

In recent days I have been in Marlborough, supporting my colleague Marvin Pangborn as he led a group of Lincoln University Diploma in Farm Management students studying land use and land use change. Inevitably our field tour included a focus on the Marlborough wine industry. Continue reading

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Doubling agri-food exports

[This post was first published in the Fairfax NZ Sunday Star Times on 8 March 2015]

The New Zealand Government has set itself a target of doubling agri-food exports between 2012 and 2025. The big question is where is this growth going to come from?

The target has been set in constant value dollars following adjustment for inflation. It requires an annual compound growth rate of about 5.5 percent. In nominal terms, before adjustment for inflation, the annual target will need to be even higher.

There are four main sources of potential growth. The first is increased physical production. The second is more value-adding of commodities into sophisticated ingredients and consumer products, and the marketing thereof. The third is through agri-food technology exports. The fourth is increased prices. Continue reading

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Fonterra and the two-company model

[This is the fifth and last post in the current series on Fonterra. It was first published in the Fairfax NZ Sunday Star Times on 1 March 2015 under the title ‘Don’t cry over spilt milk’ and then republished online in ‘Stuff’ under the title ‘Culture is king over strategy for Fonterra’. (Choosing the news title is the prerogative of the editors, not the author. Sometimes they use my supplied title and sometimes they don’t.)]

In recent weeks I have been writing about the key issues that Fonterra faces. This week I will look at one specific strategy to deal with those issues.

There are two key issues that stand out from the rest. The first is that Fonterra is trying to be good at too many things. It is trying to be a processor and marketer of commodities with a focus on cost and logistical efficiency. It is trying to be a supplier of specialist ingredients based on science and technological innovation. And it is trying to be a marketer of fast moving consumer goods based on entrepreneurial flair and panache. It is performing well with the first, but struggling with the other two. Continue reading

Posted in Agribusiness, Dairy, Fonterra, The Fairfax SST Articles | 5 Comments