10 Dec 2013

Meat industry looks to tackle over-capacity

6:28 am on 10 December 2013

The meat industry needs to keep looking for a solution to its processing over-capacity because it's an issue that isn't going to go away, the head of one of the country's big four meat companies says.

ANZCO Foods has been exploring rationalisation options with the two big meat co-operatives, Silver Fern Farms and Alliance.

They have been focusing on solving the over-capacity issue, as having under-used processing plants erodes meat company profitability - a problem which is worsening due to the ongoing loss of sheep and beef production to dairy expansion.

The Government turned down a request for legislative backing to tackle over-capacity by introducing a tradeable processing rights system, because other companies were not supporting it.

ANZCO chairman Sir Graeme Harrison acknowledged having three of the four major companies on board was not enough but said the industry had to sort it out.

"Look, sooner or later change has to happen in the industry in terms of capacity," Sir Graeme said.

"Farmers sometimes forget that the processing industry has to make money so that it can reinvest, so no one could say that in the last 10 years, any excess profits have been made in the New Zealand meat industry."

Capacity had to be taken out, and that was something which had to be engineered, he said.

"You can leave it to market forces. That means we will have no knowledge of the absolute outcome - it'll just be it'll happen - or you can try to find a process which could be in place for a number of years and it would be seen as a transition step."