The first step in what some consider long overdue restructuring of the ailing meat industry was taken yesterday, with shareholders in Dunedin-based Silver Fern Farms voting in favour of a partnership with PGG Wrightson.
Buoyed by the result, PGG Wrightson (PGG-W) chairman Craig Norgate said he would approach Invercargill co-operative Alliance Group in the next few weeks to see if the two companies could work together and ultimately merge.
By the narrowest of margins, 75.62% of votes lodged supported the deal in which rural servicing company PGG Wrightson will invest $220 million for a half share in the Dunedin meat co-operative.
The plan required 75% shareholder approval.
The news has been hailed by the wider rural sector, with Agriculture Minister Jim Anderton viewing it as a vote of confidence in the meat industry.
"People are looking to the future, which is a good sign, and they are thinking logically and rationally about the way forward," he said in an interview.
Otago Federated Farmers meat and fibre president Rob Lawson was also delighted with the result, especially at the potential input to the company from noted business leaders Mr Norgate and PGG-Wrightson chief executive Tim Miles.
He hoped Alliance would now be more receptive about an eventual merger.
National sheep numbers have fallen to 38 million, the lowest in 50 years, largely because of farmers converting to more profitable dairying and dairy support, reducing the need for meat processing capacity.
The average sheep farmer last year reported a $19,000 profit and is forecast this year to record a $53,000 profit, well below what dairy farmers are making.
Meat and Wool New Zealand expects 550 sheep and beef farms will convert to dairying between 2007 and 2009.
Mr Norgate hoped to take advantage of yesterday's message that farmers want change.
"I want to sit down with Alliance in the next few weeks and see if we can start working together," he said.
Several previous attempts at industry consolidation have failed, and twice in recent months SFF has approached Alliance with offers to talk.
These have been rejected.
Yesterday, Alliance chairman Owen Poole was similarly unreceptive to any approach by Mr Norgate.
"Anything that will add value on a sustainable basis, we're open-minded. But we have seen the [partnership] business case and there is nothing of any attraction for Alliance, principally because it would not add any value."
Alliance fears farmers will lose control of their co-operative under the deal between PGG-W and SFF and has said it has already made the consumer-driven production changes SFF is proposing.
Mr Norgate believed these concerns could be addressed, and he would be happy to play the role of "honest broker".
"This is about the industry's needs for the future."
There were few opportunities left for sheep farmers.
Unless something happened in the next three to five years, there would be no sheep industry left because all the best land would have been converted to dairy.
An emotional Silver Fern Farms chairman Eoin Garden yesterday thanked shareholders for showing leadership, saying the board had been "given a message that shareholders want [the board] to take them forward."
The vote sent a message to the meat industry that farmers wanted change, he said, and that included a change to the way companies operated.