September 17, 2008

Farmers Look for Higher Returns


Some industry pundits believe with less stock available, companies will be talking to each other more. -------------------- Farmers are expecting higher returns once Silver Fern Farms (SFF) and PGG Wrightson (PGW) join forces, and industry watchdogs said they will keep an eye on the merged company.

SFF farmer shareholders voted for the partnership proposal with PGW.

"In my experience, corporates value their shareholders and clients far more than co-operatives do, Taranaki farm supervisor Bill Laurence said.

"When co-operatives are too big, they appear to become inefficient and lose touch with their shareholders."

Under the the partnership, PGW will contribute $220 million to recapitalise Silver Fern.

Farmers believe relieving the debt of Silver Fern Farms, will see an increase in returns to them.

Taranaki farmer Bryan Hocken voted for the partnership.

"I believe they couldn't carry on the same track they have for the last 100 years. Something has got to change. I hope it is the right direction."

Manawatu Rangitkei Federated Farmers Meat and Fibre chairman, Tony Gray said that while the SFF debt reduction should result in farers being paid more, the merger will not change the price for New Zealand lamb in overseas markets.

"The benefits to farmers will come through the debt reduction and because the merger forms a stronger player in the meat industry."

"Whatever the structural form and commercial strategies that the New Zealand meat industry pursues, the industry needs to work towards growing the pie and increasing the returns from the great product that they produce," Agriculture Minister Jim Anderton said.

However, there will be no merger between the Alliance Group and SSF after Alliance Group shareholders voted overwhelmingly against the proposal.

However some industry pundits believe with fewer stock available, companies will be talking to each other more.

One farmer says it looks like Alliance may move closer to other smaller players and continue to drive a conjoining of other companies as a co-operative.

She said Affco and SFF are already warring over ram lambs for next season.

"They were initially going to be killed and paid for at the mutton rate after January 31.

"Then it became March and now it looks as though there will be no penalty this year as several companies fight over lamb supply," she said.

Many farmers expect prices for lamb to increase because there will be a shortage of stock rather than due to industry change.

Meat and Wool New Zealand chairman Mike Petersen said he would be "watching with interest" to see SSF delivered on its promise of improved returns to sheep farmers.

"We're going to see better lamb prices this year in the absence of any changes because of supply and demand."

SFF chairman Eoin Garden said the company is about to release innovative procurement options that would put more money into farmers' pockets.

"There will be significant changes in the lamb pricing model," Mr Garden said.

The $220 million capital injection from PGW would enable SFF to cut debt, develop marketing opportunities and invest in technology such as robotics, at a far greater pace.

SFF said that there will be no wholesale job losses as a result of the partnership with PGW but the business will develop and change over time.

Federated Farmers Southland Meat and Fibre chairman Martin Hall, who voted against the proposal, said significantly higher lamb prices were needed to slow the dairy boom.

"If we get it right, lamb could be worth $120 per head and all of a sudden there will be a swing towards sheep production," Mr Hall said.

(c) 2008 Evening Standard; Palmerston North, New Zealand. Provided by ProQuest LLC. All rights Reserved.