Meat co-op dilemma
Meat processor Alliance Group's cash-strapped farmer shareholders face a dilemma - either pour more money into the co-operative or risk losing 100% ownership and control.
In its latest newsletter to supplier/shareholders, chief executive Willie Wiese says, like all red meat exporters, Alliance's livestock pricing reflects what prices it can capture in global markets.
"Weaker market conditions are being driven by persistently high inflation levels reducing consumers' discretionary spending," he told suppliers. "This has led to a decline in people eating out in restaurants and some shoppers trading down from higher priced red meat proteins - such as lamb - in their weekly grocery shops."
Wiese added there were also consistently high levels of inventory across all proteins in various markets, which is driving down demand and the price for fresh product. However, he says Alliance's inventory is on a par with levels in previous years.
"The Chinese economy is recovering slower than anticipated following Covid-19 and consumers there are more cautious with their spending," Wiese explains. "Recent information out of China suggests the current slowdown in demand will continue through the short to medium term, which has led to us diversifying some products into other markets."
He adds that the situation is also compounded by Australia producing increased volumes of sheep meat and beef.
"We are doing everything we can to mitigate the pricing volatility by re-directing product away from China into other markets," Wiese told suppliers. "We are also ramping up capacity for our farmers as we head into a busy processing period for lambs and non-replacement calves."
