Meat companies battle for early lamb kill

Press, 21 November 1986, Page 12

Meat companies battle for early lamb kill

Competition between South Island meat companies for prime iambs is hot right now, with various handsome premiums and rebates being offered to farmers.

The "going rate” for incentive payments for lambs is $5 to $7 a head above the official South Island meat export schedule, although some companies have paid a premium of $8 for specific lines.

Representatives of meat companies based in Otago and Southland have been competing with local firms for sheep in Canterbuiy in recent weeks, which has helped to push prices well above the schedule.

In most cases, the incentives and prices were reviewable or have a time limit and were introduced to encourage farmers to consign stock as early as possible. The season is running about three weeks later than normal and companies are anxious to attract sufficient stock to keep their plants operating in the leadup to the main part of the season.

This active campaigning for lambs is obviously good news for the depressed sheep industry, but farmers with memories of last year’s disastrous prices of about $l3 net a lamb still fresh in their minds fear these incentives will disappear in coming weeks as the killing season gets into full swing. Several meat company executives expect these incentives will be cut back once the lamb flow picks up; the first signs of a drought in Canterbury would precipitate a return to schedule rates.

However a view held by some stock representatives is that the competition in Canterbury from Southland and Otago will continue for much of the season because of a likely fall in stock numbers further south and a relatively greater killing overcapacity down there.

This outside demand will keep the pressure on local companies and ensure competitive prices, they believe. In any case lamb numbers in Canterbury are expected to be down considerably on the 8.1 million slaughtered in the province in 1985. Last season an estimated 6.8 million were killed and this season’s available lamb crop is expected to be about the same.

The recent improved confidence in sheep may see more of these ewe lambs retained for breeding and a bigger proportion taken on to heavier weights, further reducing and spreading the lamb kill.

Live exports out of Can-

terbury estimated at 60 to 70,000 will have very little effect on the lamb population.

The Ministry of Agriculture and Fisheries has recommended that unsecured fanners should shop around the various companies for the best rates.

Even farmers who have dealt successfully with one company for many years should find out what prices opposition companies were offering so they could gauge fair prices.

“Farmers should be prepared to bargain if they have to,” said one Ministry adviser, based in Canterbury. Companies are all offering different methods of payment, giving the impression that this is being done deliberately to prevent easy comparison.

Although the various premiums and rebates now offered make the weekly export schedule look redundant, most observers believe the schedule still fills an important role. It provides the industry with a baseline of prices which reflect the types of lambs wanted at various stages of the season. It is claimed that the weekly schedule-setting conference telephone call allows the tail to ( wag the dog, but it appears to suit most companies to have a lowest common denominator “market-price” schedule and differentiate between themselves with nonschedule payments. The premiums and rebates being offered at the moment by some companies have forced competitors to respond by matching market rates, often on a per head basis on the farm.

The C.S. Stevens Group and the Challenge Meats Group — comprising Southland Frozen Meat and D.M.B.A. Dunedin — are this season offering contracts to farmers for the supply of a range of lamb grades. Although reluctant to give numbers of the lambs contracted so far, the Stevens Group says it has received an excellent response.

Challenge Meats estimates it has contracted 1.5 million head of stock so far this season and hopes to have a total of 3 million under contract. The operations supply manager, Mr Gordon Smithies, said the contract provides for an advance payment of $2 a head at the signing of the contract.

Most of the contracts are with Southland farmers and very few are held by farmers in Canterbury. Challenge Meats has announced its own net schedule of lamb prices to

farmers as it does not acknowledge the national schedule, said Mr Smithies. The Challenge schedule offers farmers $25.12 net for a 14kg lamb and pelt (at $7) compared with a price of $24.23 currently offered by competitors. Canterbury-based companies including Canterbury Frozen Meat (the processing division of P.P.C.S.) and Fortex along with Waitaki International are offering farmers a $3 marketing premium per lamb and a $2 killing rebate in addition to any final pool payouts or lower killing and processing charges. Farmerowned co-operatives made a final payment of $2 to $3 a lamb above schedule last season. Another Southlandbased processor, the Alliance Freezing Company, is offering a premium of $3.50 a lamb, decreasing 25c a week to $1 and ceasing on January 17, as well as a doubling in the bonus or differential rebate to shareholder suppliers for stock killed in November. The rebate in December and January will be at 1.5 times its normal level.