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Meat Industry Changes

Greetings Readers

SheepCo chairman Mike Petersen raised an interesting question at ASB Bank sheep and beef business conference in Invercargill yesterday.

That question is land use. Much has been made of the expansion of the dairy industry in the past decade and the excitement of that phase may now be turning to a need for realism in gauging the most efficient use of land.

Mr Petersen, expressed confidence that dairy farms, particularly those in marginal areas, would be reconverted to specialist lamb-finishing operations for the better lifestyle sheep farming offered.

However it is more than just lifestyle that will motivate the changes at the margins.

As in all economics driven farm production cycles the costs seem to escalate for the new entrants as they establish. A change to what may have appeared to be super profits into average profits on capital invested by the new entrants.

The current dairy expansion boom started at a time when the real additional processing costs for the new entrants was carried by the existing producers. It may end in the harsh reality of cost apportionment to new and expanding entrants both in terms of processing cost and feed costs will deter new entrants and cause a contraction of expansion plans for existing producers.

It could also be that dairy heifer and dry cow grazing were attractive alternatives for traditional sheep and beef producers at an unstable time in their industries fortunes but the role of cheap supplementary feed source or stock grazer propping up that extra dairy production may be coming to an end because more profitable options may be available for the pasture that they grow.

The confidence expressed by Mr Peterson has been a long time in gestation and a casual dismissal of its presence will be costly for potential meat producers and dairy producers alike.

Good Farming

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