Long fight against losses for Meat Board

Press, 18 February 1983, Page 20

Long fight against losses for Meat Board

By

HUGH STRINGLEMAN

The Meat Board’s lamb marketing arrangement had

been set up to run for two years and “nothing that has happened since showed any likelihood of changing that time." the chairman of the board. Mr Adam Begg has said. Mr Begg was responding last week to a series of questions on progress under the lamb marketing scheme. He was in Christchurch for the annual meeting of the Lamb Promotion Co-Ordinat-ing Committee, a joint venture between New Zealand and the United States to promote lamb in the U.S. Mr Begg said that pressure would be on New Zea-

land lamb exports "for some time yet" and that it was going to need 12 months of steady selling to improve to a credit position. Just how much improvement is going to be needed was made clear earlier this week when the board released its financial statement for the vear ended September 30. 1982. This showed that there was a loss on meat trading during the year of $59.7 million, of which $33 million was attributable to lamb and $26.7 million to mutton.

During the 1981-82 season, the report said, the board purchased 163.000 tonnes of sheepmeats at a buy-in cost of $136.5 million in the process of supporting farmers income. The loss of $59.7 million had contributed to an accumulated debit balance in the meat income staabilisation account of $64.6 million, of which $52.2 million could be attributed to sheepmeats and $12.4 million to beef. "Because the account is designed to be self-balanc-ing.’ said Mr Begg, “this

amount will have to be recovered from sheep and beef farmers when market returns improve." The financial statement also pointed out that the board had paid farmers $35.6 million for mutton but that killing and freezing charges for mutton were $64.7 million. “When shipping and insurance charges are added to the killing and freezing cost it becomes clear that any further percentage increase in overall costs could make the processing of adult sheep for export uneconomic for farmers." The board also disclosed that it had to write down the stocks of mutton and lamb very heavily. The reduction in value of stocks from cost to net realisable value amounted to $33.8 million, which represented half of the deficit.

During the interview last week Mr Begg staunchly defended the staff of the Meat

Board, saying that they had done a massive job well in a short time. He was replying to allegations that the board "bureaucracy" was stifling export opportunities and taking a long time to make decisions. Mr Begg said that un-

doubtedly some criticism of this nature would be justified but certainly not all. The board also recently moved to restrict the opportunities of meat exporters to “buy back" lamb supplies for further processing and subsequent exporting on their own account.

As this was the major area of private enterprise involvement other than selling on commission, left to meat exporters under the lamb marketing scheme, there has been dissension among exporters over the move. Mr Begg said: “The buy back arrangement is certainly not progressing as we had hoped, mainly because of uncertainty surrounding price." Suitable markets are difficult to find at present. For example, no new season's lamb has been sold on the United Kingdom market, so we can’t be certain what it is worth.

Much of the historical trade in cut lambs with the United Kingdom has been on the basis of price negotiated when the product arrived in the United Kingdom and this seemed to suit evervone."

Therefore the board had moved to retain ownership of further processed lamb into the United Kingdom market. However a number of companies were cutting lambs on commission for the board and packing in their own brands. "Company product identification is being maintained and this is more important than ownership at this time." said Mr Begg. "But I know that there are a few companies anxious to make buy back arrangements and who are having difficulty in coming to an arrangement. "It is still the boards intention to try and make buy back arrangements, but it reallv comes back to

price." he said. One bright spot in the market was the opportunities presented by the continuing Australian drought, said Mr Begg. Beef exports would be well down this year and sheepmeat exports would be affected also. The chances were that it would be a good year for New Zealand manufacturing beef exports to the United States and that this would lead to an overall improvement in beef returns for New Zealand in 1983. Unfortunately farmers had moved too far out of beef cattle. Mr Begg said, and therefore New Zealand was not in a position to take full advantage of the opportunities the Australian drought presented. The board had always maintained that farmers should carry the ratio of cattle to sheep that their land dictated and not try to follow the market trends.