The New Zealand government and several private sector companies are jointly investing up to $151 million to overhaul the red meat sector with the hope of lifting the economic value of the sector.
The partners are Silver Fern Farms, PGG Wrightson and Landcorp Farming who are keen to transform the red meat industry to develop a “plate to pasture” integrated supply chain focused on consumer demand. If successful, it is estimated that this programme will grow the red meat sector by 50% by 2025.
Private sector partners will provide 61% - or $92 million - of the $151 million total investment. Silver Fern Farms, as lead investor, is contributing 45% ($68 million) of the total while co-funders PGG Wrightson and Landcorp Farming will provide a mix of capital, in kind skills and advisory, nutritional expertise and resourcing across the seven projects that form the programme. The Government will provide the remainder of the investment through the Primary Growth Partnership fund.
The investment is aimed at helping lifting red meat sectors’ contribution to GDP of $1.1 billion over the seven years of the programme, for a net economic benefit of $8.8 billion out into 2025, according to a government press release.
The programmes – to be executed through a joint venture called Farm IQSystems Ltd - have seven project streams and 18 sub-projects work to improve the capture and utilisation of both market and farm production information. This information will then support the development of new value-driven genetics and extension work that underpin the programme.
Currently New Zealand’s supply chain is inefficient and production driven. This has led to an unsustainable supply chain that pushes supply of product and has led to market failure. As a result, farmers are distant from their customers and the supply chain has little ability to respond to changing consumer demands.
The partners have developed a value chain business model that enables collaborative behaviour and seeks to improve the sustainability of returns for all participants.
The programme consists of seven projects designed to build and enhance capability, and develop and integrate new technologies or infrastructure. The projects are: market analysis; database; genetics; processing phenotype collection; processing improvements; technology transfer, and farm productive capacity.
For the first time, customer and consumer information will be captured in an industry managed database and their needs and specifications will be communicated to participants in the value chain.
This will enable farmer suppliers to understand what customers want and to use new research-based knowledge to tailor their farming systems and supply exactly to what the customer desires.
Silver Fern Farms CEO Keith Cooper says he is delighted the Government has recognised the critical importance of this collaboration to New Zealand.
“More and more of our markets treat red meat like a fast moving consumer good and demand that New Zealand, on the other side of the world, understands and responds to changes in consumer needs. Today’s landmark announcement is a big step in transforming our industry so we can become truly market focused and a global leader in this regard,” says Cooper.
New Zealand Institute of Economic Research (NZIER) figures used to support the private sector partners’ application to the PGP fund show the New Zealand farmer and the country as a whole stands to benefit as the programme is rolled out.
NZIER CEO, Jean-Pierre de Raad, says its models show the programme will provide a net economic benefit of $521 million over the seven years of the planned investment programme.
Economic modeling for the project shows the potential benefit to farmers from on-farm production gains are significant, with gross margins per hectare potentially more than doubling after year two.
If predicted gains from processing efficiencies and market returns are added, those margins would increase again.
PGG Wrightson Managing Director Tim Miles says to truly transform the red meat sector, the industry must be able to take market signals and actively respond to them.
“We are traditionally very good at production, but we have been collectively poor at tapping into the benefits of true integration. This new market-led joint venture would ensure the long term health of the red meat sector and that of the farming community that operates within it.”