2 minute read
Chair urges caution as high prices turn heads
Farmlands Board Chairman and Silver Fern Farms Co-Chairman Rob Hewett sees a potential storm brewing for farmers holding on to stock later into the autumn to take advantage of hot in-market prices.
In dairy, a looming record pay-out will tempt farmers to maximise their milk production for as long as possible. It’s similar with sheepmeat – farmers looking to take advantage of all-time high prices may be tempted to grow their lambs on so they go to the processor with as much weight on as possible. It’s not a one-way bet though. Holding livestock to maximise on-farm revenue may come back to bite when the processors are operating at capacity and may not be able to take the stock when the farmer is ready to send them. Why? COVID-related disruptions to international shipping trade have made container availability and shipping services tight, causing unloading delays in virtually all markets around the world. These had a chilling effect on exports in 2021 and the expectation is that nothing has eased for 2022. Add the real possibility of COVID-19 disrupting labour supply in processing plants during peak season harvest and key industries such as transport and Rob sees a potential crunch coming late April to mid June. Predictions of a 30-40 percent drop in workforce availability due to Omicron come on top of an already acute shortage of labour due to an absence of temporary visa overseas workers. “The 3-week wait time we saw last year for a boat arriving at Long Beach, California, to unload hasn’t gone away. That causes congestion in the supply chain and eventually the industry will run out of chiller and freezer space in New Zealand. It happened last year, and while the industry can mitigate to a degree with charter vessels, supply chain congestion is a real likelihood this year as well. If it does happen again this year, the ability to process livestock at capacity will likely be impacted.” With the benefit of his Silver Fern Farms role, Rob can see the difficulty for the meat processors. Apart from supply chain congestion and labour shortages, typically their business model requires a daily balance of product coming through the plant – prime beef mainly from beef breeds like Angus and Hereford and “grinder” beef for the likes of hamburger patties mainly from bulls, dairy and cull cows. “Meat companies try to maximise production, based on customer demand. We need to service our prime customers as well as dairy. To say we can slaughter all the dairy cows in a short time is to not deliver the total customer set what they need.” The storm will hit hard in late autumn for those farmers still holding stock as they deal with the stressful combination of a queue at the processor, congested supply chains and stock to maintain as the grass curve slows and the supply of pasture slows down – and supplementary feed costs rise. “All farmers need to make an informed decision around the cost of consuming extra autumn/winter feed versus the incremental margin made from extended production. There is an opportunity cost of hanging onto livestock to maximise on-farm revenue,” Rob says. “It’s not a one-way bet. Farmers should be thinking about this now and having discussions with their livestock processor to ensure stock is processed on an agreed timeframe meeting everyone’s needs.”
