Fonterra shrugged off the effects of COVID-19 in many markets to record a $67 million rise in normalised earnings before income tax (EBIT).
These are some of conclusions in the first ever report on state of the Red Meat Sector – jointly produced by the Meat Industry Association and Beef+Lamb NZ.
In the introduction to the report, the respective organisations’ chief executives, Sirma Karapeev and Sam McIvor state that post Covid-19, the world is going to be a different place that creates both threats and opportunities for the sector. They say the sector must collaborate and that this is critical to its long term success.
This work is underway on a new ‘whole of sector strategy’ to replace the one produced about a decade ago and which considers the variables and uncertainty created by the Covid pandemic.
The report sets out the policy and infrastructure areas that the meat sector wishes to collaborate with government on and which it says is necessary to allow the industry to operate in the future.
The list contains few surprises – keeping international markets open, restraining the amount of forestry offsets, better rural connectivity, more water storage solutions, investment in R&D, support for farmers to improve the environment and skills development to build up an effective labour force.
McIvor says there is a real need for the Government to support the country’s exporters, including opening up new markets and negotiating free trade agreements. He says there is huge uncertainty in the world of trade with the future of the World Trade Organisation (WTO) and rules based trading under threat.
Covid has forced a massive change on the way consumers shop and eat in some of the key countries NZ exports to such as the USA and Europe. The food service sector – restaurants and like - which was a key target for our high value cuts - has all but disappeared. But the agility and innovativeness of NZ companies has changed with the trend says Sam McIvor. “Beef+LambNZ with its brand Taste Pure Nature has just kicked off a joint venture with Silver Fern Farms and an American company called Marks Foods,” he told Rural News.
“They used to be strong in the food service sector but we have opened up an online operation offering cuts normally destined for the food service sector, direct to consumers.”
McIvor says a recent study in the USA predicts a 41% increase in customers in that country buying their groceries online and that e-commerce spending has hit record levels. He says the other question to factor in is that once Covid is over, will consumers go back to their eating out habits or will they continue to do more cooking at home.
Issues for farming and farmers
Another learning from Covid-19 McIvor says has been the importance to rural people of good connectivity – including cell phone coverage and quality broadband.
He says technology is already playing an increasing important role behind the farm gate. Farmers he says need to be able to handle large amounts of information to run their businesses.
“The farmer today has far greater contact with their processor, customers and stakeholders and need to be able to communicate with them quickly. They also use technology to monitor systems on farm and supply data to regulators such as councils to prove they are meeting consents or regulations.”
McIvor says connectivity is also critical for attracting people to rural areas. This is highlighted in the report which notes that getting the right people with the right skills is an ongoing challenge. The report highlights the fact that the red meat sector provides 92,000 full time equivalent jobs – nearly 5% of total national employment. In some regions such as Otago and Southland the sector makes up 12% of the regional economy and employment.
Another issue highlighted in the report, and one that concerns McIvor, is carbon farming. Whereby people buy up productive sheep farms and plant trees to sequester carbon.
McIvor says while they accept that famers are entitled to sell their farms, especially as they near retirement. However, they are not in favour of industrial carbon emitters been effectively subsidised to dump their emissions on sheep and beef farms.
“This type of operation doesn’t create any jobs or exports and grow any wealth for NZ. But what it does is risk decimating rural communities. I have seen communities like this myself on the East Coast of the North Island,” he says.