Vote will decide future direction of meat industry

Tag : Natural Wool

PGG Wrightson's move on Silver Fern Farms - formerly PPCS - isexpected to clarify the much-debated issue of farmer control of theindustry.
Silver Fern farmers will be asked to surrender control of theircompany to a partnership with Wrightson, with the two partners eachhaving four members on the board.
In September, the 9000 farmers will vote on the deal, with a 75percent majority needed to allow the cooperative's constitution tobe changed.
The farmers' four directors will include one appointed by a farmershareholder council within the company, New Zealand's largest meatprocessor.
"The big question is: who are the natural owners of the assets - isit the farmers or is it others?" Meat and Wool NZ chairman MikePetersen.
"We're going to get answers now, from the vote the Silver Fernfarmers have".
Cooperatives Association chairman Peter Macdougall said last nighthe was concerned about the effect on farmer income if half ofSilver Fern Farms was sold to PGG Wrightson.
"This is a decision the members of the cooperative need to make. Itcomes down to how they believe they'll be getting the best dollarfor their animals, and to what extent they want to retain controlof their cooperative business."
"The same dollar can't go in two directions," he said.
"Farmer members will be interested to know how the cooperative canretain its cooperative status with PGG Wrightson holding half ofthe voting shares."
The Cooperative Companies Act 1996 only allows for 40 percent ofinvestor shares in a cooperative.
PGG Wrightson is seeking a 50 percent stake in Silver Fern Farms,and offering to pay $220 million.
Silver Fern chairman Eoin Garden told a media briefing inChristchurch that the deal may generate savings of at least $60million a year, and Wrightson chairman Craig Norgate said hislisted company may sell $75 million of shares to pay for theinvestment. The rest would be borrowed.
As PPCS Ltd, Silver Fern last year called for a meat merger toreduce competition for stock, cut surplus processing capacity andimprove overseas marketing, but was rebuffed by South Island rivalAlliance Group.
In March, Alliance Group was knocked back by PPCS on a furthermega-merger proposal, not realising PPCS had already beendiscussing the Wrightson partnership for a couple of months.
And last week, Meat and Wool NZ folded its industry taskforce afteraccountants PricewaterhouseCoopers said they baulked at drawing upan industry strategy. It did not know the same accountants hadalready compiled a strategy for Wrightson and Silver Fern.
The Wrightson strategy calls for a switch from having 70 percent ofsheep slaughter taking place between December and May each year -originally to export frozen carcasses - to providing high-valuechilled cuts all-year round.
The meat business will be driven by customer demand for specificcuts rather than processors trying to sell whatever farmers haveproduced.
Mr Norgate, whose company relies heavily on commission from thebuying and selling of livestock, said: "We get a benefit if sheepand beef farmers are doing well".
Farmers will be offered guaranteed price contracts and guaranteedprocessing space in return for a commitment to supply particularanimals at specific times.
Farmers will be advised on what animal genetics, grass and fodderplants to use, and how to manage their pastures. Wrightson willpurchase the stock.
Silver Fern will process, market and deliver the product to market,targeting the boom growth of affluent consumers in places such asChina and India.