Meat companies slated over offal practices

Press, 21 May 1982, Page 8

Meat companies slated over offal practices

Freezing company policies appear largely to have left their rural interest for that of the protected industrial sector of New Zealand, Mr L. .Kingsbury, of Rakaia, told the Lincoln College Farmers' Conference this week.

Mr Kingsbury, recently elected president of the meat and wool section of MidCanterbury Federated Farmers, delivered a major paper entitled: “Is there a better deal for by-products?”

In summary he said that for the first 80 or 90 years of New Zealand’s meat industry. farmers as a group had been shareholders or sympathisers with the meat processing industry.

But now shares of the local companies had largely left farmers’ hands and company policy had now moved towards the protected industrial sector.

“These may be hard words, but I mean them sincerely as a person who wants to remain with a profitable share of a two billion dollar meat industry,” he said.

“By-products represent a greater income to the country than do hides, pelts and slipe wool, which have separate payments to the producer.

“By-products remain as one portion of the animal that has been under-estim-ated, under-exploited and under-sold.”

Mr Kingsbury said he believed in the future a greater emphasis would be placed on further processing and marketing of many by-products. He said the open door policy in the meat industry would come to be applied to variety meats (or edible offals).

The open door policy applies to meat carcases andensures that the operators who place stock with an export abattoir to be killed can take the carcases out. It does not apply to offals, which become the property of the abattoir. Mr Kingsbury also said that freezing companies would eventually split the processing part of their business away from the exporting part. “Their service will become a more clearly identifiable intermediary in the whole production and marketing chain. “In areas of the country where there is little competition between companies, farmers there may face more difficulties in sharing rewards of these changes,” he said. Mr Kingsbury said edible and inedible offa.ls represented about one quarter of the weight of ruminants and around 10 per cent of the total t.o.b. value of the production of the meat industry, which in 1980-81 totalled ?1814 million. Variety meats or edible offals accounted for 40 per cent of the $lBB million earned by all offals. The present charge per head for processing and stor-' ing a 14kg lamb by one South Island company was $8.87. He said the net return from by-products to the company was around $3 a head.

He said the direct killing charge in the same works for a manufacturing cow was $126.48. The credit for by-products (excluding the hide) was understood to. be as much as $7O a head, according to Mr Kingsbury.' After Mr Kingsbury presented his paper the assistant general manager of New Zealand’s largest meat company, Waitaki N.Z. Refrigerating, Ltd, Mr J. M. Ryan, said the credits to the freezing companies from offals per animal were not the figures put toward in the paper.

“They are a mile away from the truth.” he said. He would not reveal the true figures. Mr Ryan said he disagreed almost entirely with the conclusions in Mr Kingsbury’s paper.

Where Mr Kingsbury alleged inefficiency in the sale by meat companies of offals in bulk orders at predetermined prices, Mr Ryan claimed this was not sloppy marketing but very necessary.

He gave the example of the sale by Waitaki N.Z.R. of extracts of enzymes and hormones and other fine chemicals. These had to be sold long-term because they were high-risk products which required huge throughputs of animals killed to generate small volumes of the products.

Mr Kingsbury repeated a statement at the time of the debate about the 1981 Meat Act by the Minister of Agriculture (Mr Maclntyre) that offals represented the freezing companies’ profit. Mr Ryan countered that if that was an accuarate quotation of Mr Maclntyre then it was not a wholly true statement. He conceded that the efficiency of recovery of of-

fals had a large effect on company profit, but a dozen other areas of operation had a similar effect.

Mr Ryan maintained that if the open door policy was applied to offals, processing costs would rise Significantly and marketing would be affected.

He said he did not know of any operator who would want to have the facility to retain his offal. The chairman of Phoenix Meat Company, Ltd, Mr Malcolm Wallace, said the returns for by-products varied considerably between companies and it would be to the detriment of companies if these returns were released.

Mr Kingsbury said for reasons of difficulty in ap-, portioning costs to individual farmers the categories for which farmers have been paid for their stock have

been kept to a minimum. “Micro-processors now make this relatively easy.”In the past 10 to 15 years freezing companies and meat exporters have been prepared to handle and process more grades of carcase from particular lines of animal.

They have also been prepared, in the case of sheep and lambs, to recognise wool pulls of differing amounts. They have also been able to handle under the system various penalties such as seedy pelts, merino type riby pelts and black wool. “Until recently all sectors of the industry from farmer, through processor to various handlers of products were receiving an acceptable profit. This distribution of the total income is now’ changing,” said Mr Kingsbury. “As profit margins to the

farmer decrease, elements of cross subsidisation within the processing industry itself and between farmers become less tolerable. “As returns to the farmer decrease and on-farm costs increase at rates much higher than domestic inflation, farmers are questioning many efficiencies within the freezing industry operation as it affects them. “Farmers view the confidentiality of all aspects of by-product recovery and sale with some concern. “The present debate for a separate or recognisable return for offal fits this rationale.

“Meat exporting companies wanting access to variety meats by way of the open door policy just fortuitously happens to coincide with farmer thinking,” he said.