Sheep and beef farmers are forgoing $100 million a year in savings by not merging the co-operatives Silver Fern Farms and Alliance Group and changing the way meat is marketed, an industry leader says.
While no merger talks are under way, Silver Fern Farms (SFF) chairman Eoin Garden said he had calculated the $100 million "being left on the table" to make shareholders think about wider meat industry issues and changes needed to ensure it has a future.
"Our industry is not going to survive the way it is, due to competition from land uses such as dairying and forestry.
We've got to lift this industry into a totally different space."
Mr Garden said there were no merger talks between the two co-operatives or between SFF and any other meat company, but any such move would be based on commercial reality and driven by farmer-shareholders.
Gains were possible by consolidating marketing and industry rationalisation, but Mr Garden said along with that was a need to change the way meat was supplied.
Alliance Group chairman Owen Poole questioned the $100 million figure, saying an analysis by his company, SFF, and independently by PricewaterhouseCoopers, found a figure well short of that, which was the reason the two companies had not pursued it.
Of any potential savings, Mr Poole said most farmers would hardly notice it.
"It is largely immaterial on a per stock unit basis.
"If it was worthwhile, then we would have done it."
He was surprised Mr Garden was now talking about industry aggregation, given that two and a-half years ago SFF withdrew from his proposal which would have seen the merger of five companies dealing with 80% of the red-meat kill and would have provided economic benefits of $450 million.
"That opportunity was there and SFF spurned it," he said.
At the time, SFF said concessions that allowed some participants to keep parts of their business outside the merged entity, compromised its effectiveness.
Mr Garden said improving the industry's viability required more than just changing company ownership.
The industry had to change the way it operated to add value to products, not costs.
A lamb procurement war this season, driven by companies' needs to maximise the number of animals processed to keep costs down, simply added costs, not value, to end products.
"If it's not about managing seasonal supply so we can meet market requirements better, it's not adding value."
Mr Garden also defended SFF's application to the Primary Growth Partnership Fund, together with PGG Wrightson and Landcorp, for funding to try to find a new industry model.
If successful, it would fund research into an integrated supply chain that used science, genetics and analysis which, SFF has said, would allow farmers to produce meat with specific attributes for specific markets.
SFF will invest $60 million over several years in the project.
"Heaven help us if we can't have business taking a commercial initiative to drive opportunity without being criticised."
