Meat Board view on marketing, stabilisation

Press, Volume CXV, Issue 33874, 20 June 1975, Page 16

Meat Board view on marketing, stabilisation

The deputy chairman of the Meat Board, Mr A. M. Begg, has made it quite clear in two recent statements that the board is opposed to the concept of it or some other organisation handling the marketing of all of New Zealand’s meat.

Thus the board is also not in favour of a proposal being considered by the Dairy Board that it should market beef from cull dairy cows. But it accepts the concept of a measure of stabilisation and income equalisation in the industry.

The Zanetti committee’s proposal that the board should take over all meat at the hooks and then pass it on to selected exporters to sell on a commission basis was completely unacceptable to the board, Mr Begg said at a meat industry field day at Whangarei recently. The report of the committee, he said, was useful for the wealth of factual material it contained, and its analysis of the situation facing farmers and the country was quite outstanding, but its proposed remedies displayed a lack of practical experience in the marketing of meat and in the realities of New Zealand politics. “The proposals made in regard to marketing cause the board grave concern,” he said. “The board has no doctrinaire approach to marketing,” Mr Begg said in an address to the annual conference of the Dominion Dairy Section of Federated Farmers in Wellington last week.

“'Our prime objective is always to obtain the best net return for the meat producer and all the board’s activities are directed to that end ... “In our various studies of marketing we have not been influenced by the attitudes of farmers (in Whangarei he said they had not been swayed in their opinion by ultra-conservative, Right-wing farmers nor by groups of dedicated supporters of the co-operative principle). We have taken the view that it is our responsibility to study factual situations and to deal with realities, not with attitudes and opinions. “Our present approach to meat marketing has evolved over a long period of years. Since our successful intervention in the lamb market in 1971. when we handled sales of some Sl2sm and made a profit of sBm, we have been working towards improvements in meat marketing. “Based on our experience in the market place, our studies and the advice of our officers around the world, we came to some positive conclusions and have been seeking changes to the Meat Act which will enable us to exercise greater control over the activities of meat exporters.

“In spite of the profit we made from lamb marketing. we do not consider that we could obtain as good a return for producers, over a period, as do the present exporters operating in competition and having their over-all activities co-ordinated by the board.

“The Meat Industry Commission of Inquiry came to this very same conclusion. In the section of its report dealing with marketing it stated: “New Zealand’s interests in the marketing of meat would be best served in the foreseeable future by a controlled form of private enterprise.’ The report

states that this conclusion was reached ‘after looking at the meat marketing systems in many importing countries and witnessing their complex nature.’ “I can say now, as a member of that Commission, that the Commission looked long and hard at the evidence presented on marketing and at the operations of the Meat Board. There was, and is still, a good theoretical case for a single-seller system. “However, the private enterprise system has certain inherent advantages which make it most suitable for the meat trade which depends very largely on individual judgment, requires a high degree of flexibility and is carried out in most parts of the world on a basis of personal contact and mutual respect between buyer and seller. Under these circumstances, best results are obtained when individual initiative, efficiency and effort are rewarded.

“The setting up of a meat marketing commission in New Zealand would of itself do little or nothing to stabilise world markets which consist mainly of home-produced meat. It is not generally recognised that only about 7 per cent of the world’s total meat production enters international trade.

“We believe firmly •in the principle of producer control and consider that the effective licensing of private exporters will obtain a better return for meat producers than the board could obtain by becoming a monopoly seller with the sole right to export New Zealand meat. “On the question of manufacturing beef exports, I want to say that, administratively, it would be comparatively simple to sell the beef derived from cull dairy cows. Manufacturing beef derived from beef cattle, however, is a different story. At times, depending on market conditions, up to 60 per cent of the meat derived from a prime steer may find its way into the manufacturing beef trade. The meat derived from one animal may well find its way to six different countries. “The Dairy Board has set up a committee to study the possibility of it taking over sole responsibility for the sale of manufacturing beef derived from the dairy’ herd. We have offered that committee our full co-operation and will gladly assist it in whatever way we can.

“This would make the operation of a singleselling system for all manufacturing beef complicated, but not impossible.

“The major problem is that, while we regard ourselves as a major supplier of beef to the United States, — which is the major and the most lucrative market for manufacturing beef — our total exports to that country amount to only 1.4 per cent of its annual consumption. This means that any effect we have on prices is extremely marginal. The price is set on the local United States market. The importers and distributors in that country buy where they can buy best — Australia, New

Zealand or the United States. If they were faced by a single seller in New Zealand, they would react immediately in the same way as we would to a monopoly supplier of commodities we wished to buy.

“I have attended the American Meat Importers’ Council annual meeting in each of the past two years and, in my opinion, for New Zealand to attempt to sell to them as a single seller monopoly would be disastrous for us.

“This opinion is not based on any doctrinaire approach. Remember, we have already responded ourselves to countries with buying monopolies by confronting them with single sellers. We are prepared to conduct our business in any way which can obtain a better return for us. “In the case of manufacturing beef for North America, the way to get the best return is to supply what the customer wants, paying great attention to specifications, documentation and delivery times. In this way New Zealand’s best exporters have earned premium prices. These are the people we want in that trade.

“I am firmly convinced that, if there is one market in the world that should not be confronted by a single-seller approach, it is the North American manufacturing beef market. “Our thinking on stabilisation of meat prices paid to producers is still in the formative stages, but it is likely that we will advocate some form of commodity price smoothing,” Mr Begg said. Reference to this has already been made in “The Press.”

“We would operate two pools in our buffer account, one for beef and one for sheepmeats. Prices paid to farmers would be based on a two-year historical average, plus one year’s forward projection. Because rolling averages in a volatile market can give some serious distortions, we would want the right to set a price 15 per cent up or down on the arithmetic calculation. “A guaranteed minimum price would be announced each season and a trigger price set at, say, 20 or 30 per cent above the minimum. Prices paid to producers could fluctuate freely between these two price levels. When they exceeded the trigger level, returns to famers would be subject to a variable percentage levy. This would be applied on a graduated scale. The end result would be a desirable degree of

stability to prices farmers received for beef, but would not completely eliminate market fluctuations.

“We consider it impracticable and undesirable to have a static price throughout the season as some flexibility is needed to influence the flow of stock to slaughter and to reflect market requirements. We must not allow stabilisation to become stagnation.”

On the rebuilding of industry funds to help stabilise farmers’ incomes, Mr Begg said in Whangarei. “The proposal we put to the electoral committee in March and outlined to Federated Farmers’ meat and wool council in February, is for a percentage levy on all meat sold. In times of lower prices this would be set at a level which would provide only for the board’s annual costs. In times of better prices an additional levy would be collected to build up the reserve fund or repay Reserve Bank advances.”

Mr Begg said the average farm income as determined by the Meat and Wool Boards’ Economic Service would be used to establish a base at which the levy for income stabilising purposes would apply and also as an index to determine the level of the levy. “The main principle is that, in times of high prices, a variable percentage levy would be paid into a reserve account which would be used to support prices in times of depressed markets.”