Meat Plant for the chop?


An archive picture of the Meat Plant at Tromode, taken in 2011 by Isle of Man Newspapers photographer John Maddrell

The future of the island’s struggling Meat Plant is being reviewed.

And options being considered include contracting out the government-owned abattoir, selling it off – and even closing it down.

Details of the review project were revealed in Tynwald by Environment, Food and Agriculture Minister Richard Ronan as he was quizzed on the subsidy payments that have been made to the plant. He said the review team, headed by a business turn-round expert, was looking to ‘identify and test market feasibility options’.

 These included separate marketing, contracting out the Meat Plant, selling the entire business and even closing the plant.

 But Mr Ronan said the latter would leave the industry to the mercy of UK exporters which he certainly wouldn’t support.

He added: ‘Hopefully other options will come back. It’s important now we have a serious reality check.’

Mr Ronan said Mike McPherson had been appointed interim plant manager on May 31 following the resignation of the previous chief executive Mike Owen earlier that month for family reasons.

He said a total of £915,000 had been paid in subsidy in the 2015-16 financial year but this effectively relates to two years as Isle of Man Meats operates to a calendar trading year so £480,000 had been provided in 2015 and £435,000 towards the current trading year.

A further £295,000 had been paid in this financial year so far, he said.

Alfred Cannan (Michael) said in 2012 a subvention package worth £1.5m had been agreed as part of a three-year plan to make the Meat Plant more sustainable. ‘Has the Meat Plant now transitioned to sustainable business model? he asked.

Mr Ronan said there was a four-year Treasury approved subvention package which has decreased each year from £900,000 in 2013 to £480,000 in the last financial year and £380,000 in this financial year.

The DEFA Minister said a number of factors had influenced poor trading performance including strong cattle prices in the UK, the weak Euro and the collapse in Chinese demand impacting on local demand. ‘Quite clearly there’s still a way to go for the sustainable future of the Meat Plant and we are working towards that with the arrangements we have in place.

Mr Cannan said he wasn’t clear what sustainable future is envisaged and what future subvention is required. He said the pricing structure was playing a significant role in hindering the Meat Plant when farmers were telling him that profit margins for exporting cattle to the UK for slaughter were £75-100 per carcass.

Mr Ronan said he had heard reports of UK salesmen going round offering more per carcass. Farmers had to make a commercial decision, he said, but ultimately it would impact on the Meat Plant. He said this highlighted problems of running the plant and its efficiency and reliability.

Historic legislation will have to be reviewed for the good of the Meat Plant and the island’s agricultural industry, he said.

Brexit: NZ beef-up, or sacrificial lamb?

Brexit – New Zealand exporters are closely watching the next moves by the UK and the EU to ensure they can keep the same access to the two markets.

An Indian pedestrian gestures as he stands near a large screen showing news of Britain's vote to exit the European Union in Mumbai on 24 June 2016.

An Indian pedestrian gestures as he stands near a large screen showing news of Britain’s vote to exit the European Union in Mumbai on 24 June 2016. Photo: AFP

The European Union took $2 billion worth of New Zealand lamb and beef exports last year.

New Zealand has a quota of 280,000 tonnes of sheep meat access to the EU which comes tariff free – with half of that being taken into the UK.

Beef + Lamb New Zealand said that quota would continue, but there was uncertainty around what the change would mean for how the exports would be split and where there would be demand in future.

Given 90 percent of the UK’s sheep meats were being shipped to the EU, the split would also affect how New Zealand’s will operate.

“One scenario is that if the UK lost its sheep meat access to the EU that would switch a lot of product back onto their domestic market,” chief executive Sam McIvor said.

“Now, if the product is switched back to the domestic market that’s likely to put pressure on the UK market, but then again, the flip side of that is it might open up other opportunities for us in wider Europe.

“So that’s why it’s going to be really interesting to see just how these market dynamics play out.

“The first thing is keeping our access and then it’s really working with government to understand how these changes will play out and what impact that has on the marketplace and therefore what we need to be prioritising together to work on.”

He said the main objective would be to ensure local sheep and beef farmers got the best possible outcome from the change.

Meat cleaver

Meat cleaver Photo: 123RF

While the long-term impact on farmers was still unknown, the movements of the markets would likely have a more immediate effect, he said.

“One of the key things is really the value of the New Zealand [dollar] in comparison to the Euro and the UK pound so, if I understand it correctly, the UK Pound has already weakened which puts our dollar up in relation to that.

“So that potentially has a downside effect on sheep meat prices coming back to New Zealand. So that could be one of the immediate impacts.”

Federated Farmers said the UK made up about 3 percent of New Zealand’s trade with the EU, which totalled about 14 percent.

Opportunities in times of change

The head of Federated Farmers, William Rolleston, said there was a great deal of uncertainty but New Zealand needed to start talking to officials and governments to ensure New Zealand was seen as an important part of their trade.

“Uncertainty provides opportunity and I think we’ve got to look very closely at what the opportunities are and we’ve got to make sure that we don’t lose sight of them and that we take advantage of any opportunities that we can. The world will be a different place and we need to make sure that we’re finding our way in it.”

He said ongoing negotiations with the EU for a free trade agreement had to stay on track, and another with the UK could be necessary.

“Now we may well have to do two [free trade agreements].”

“I think this is the beginning of a process. I think there is still a lot of things to happen – in terms of the political situation in the UK for example – and also what direction Europe’s going to go in.

“Is this going to be contagion effect, how is it going to affect our relationship, our marketing relationship and our ability to trade with Europe and Britain.”

New Zealand Initiative executive director Oliver Hartwich said the Brexit could be an opportunity for New Zealand to re-establish a strong connection with its former parent country.

A concerned Chinese investor looks at prices of shares (red for price rising and green for price falling) at a stock brokerage house in Fuyang city, east China's Anhui province, 24 June 2016.

A concerned Chinese investor looks at prices of shares (red for price rising and green for price falling) at a stock brokerage house in Fuyang city, east China’s Anhui province, 24 June 2016. Photo: AFP

He said it meant Britain – a strong proponent of free trade – would have to re-negotiate trade deals with other countries, which it had not needed to do in more than four decades. That responsibility lay with the European Union executive in Brussels.

So Britain lacked experience in negotiating trade deals – an area where Dr Hartwich said New Zealand could lend a helping hand.

“We should send our trade policy experts to London to offer Britain technical assistance in actually negotiating these trade deals.”

“We’ve got plenty of that: New Zealand negotiated trade deals with China … the Trans-Pacific Partnership … we can offer Britain that expertise – in return, of course, for our own FTA with Britain, and probably also in return for better visa conditions for New Zealanders travelling to Britain.”

Dr Hartwich said Britain would be searching for allies on the world stage, and the short-, mid- and long-term effects of the Brexit boded well for New Zealand.

“Short-term consequences are the same for the rest of the world. There’s uncertainty. Nobody knows how this is going to go on, what kind of deal we can expect in the next three years between Britain and the EU.”

“Mid-term, I think we’ve got a chance of re-establishing the strong connection between New Zealand and Britain that we used to have, until Britain joined the EEC in 1973.”

“Long term, I think both Britain and New Zealand could make the most of this situation and develop a very strong trading relationship outside the EU voting bloc.”

Tourism takes a hit

One Kiwi industry expecting a downturn from Brexit was tourism.

As the value of the pound plummeted, Brits would have less to spend on holidays, meaning a drop in visitor numbers from Britain was likely.

More than 200,000 British tourists visited New Zealand last year – the fourth largest contingent behind Australia, China and the US.

Tourism Industry Aotearoa chief executive Chris Roberts said the impact on tourism was entirely down to how well the pound recovered from its initial fall.

“We wouldn’t expect Brexit itself to have any impact on tourism, but if the decline in the pound is sustained then that will have an impact because it’ll make travel for Brits more expensive,” he said.

“But about half the UK visitors to New Zealand come here to visit friends and relatives, so they’re more resilient to a change in economic conditions.”

“We will still get a very strong visitation from the UK, but it’s the impact of [the] pound that’ll have an impact on travel around the world.”

Mr Roberts said next year’s British Lions rugby tour would not be affected, and New Zealand could still expect tens of thousands of Britons for the tour.

Tom Furley and Emile Donovan –

Silver Fern Farms seeks deadline extention on Chinese deal

Meat processing company Silver Fern Farms is seeking a time extension for official approval of its controversial deal with a Chinese company.

Silver Fern Farms chairman Rob Hewett (right) and chief executive Dean Hamilton, at today's press conference at the company's Dunedin headquarters.

Silver Fern Farms chairman Rob Hewett (right) and chief executive Dean Hamilton. Photo: Radio NZ / Ian Telfer

It also wants to defer a special meeting called by unhappy shareholders.

The joint venture with China’s biggest meat processor, Shanghai Maling, was approved by a majority of shareholders last October but still needs government and Overseas Investment Office approval.

Chief executive Dean Hamilton said more time was needed to provide the required information and the parties were discussing an extension to the deadline.

A group of 80 shareholders has forced a second special meeting on 11 July, but Mr Hamilton said the company wanted to defer that to give shareholders more time to review the deal.