Brief Bites, 30 January

In this edition:

COVID-19 operating update
Processing capacity
Alliance wins Southland business award
Premium Wagyu beef offer
Changes to payment advice
Agriculture emissions February Roadshow
Supporting our Pacific neighbours
Global market update

COVID-19 operating update

With Omicron now spreading in communities across the country, there is an increased risk that COVID-19 will impact our people and processing network in the weeks and months to come.

It is almost inevitable, that at some point, this will affect our processing capacity with increased levels of absenteeism as a result of people being required to self-isolate. The situation will be compounded by the industry’s existing chronic labour shortage. The impact of this will mean we cannot run our plants to the desired capacity and maximise the value for farmers, the co-operative and the country.

Our plants and offices remain open with additional health and safety processes in place including physical distancing, temperature checking and rapid testing.

Access to plants and offices is restricted to essential visitors only and all visitors must be fully vaccinated. We have also put a pause on travel between plants and offices.

We have had contingency plans in place for some time and we hope these measures will further mitigate the impact of COVID-19. Our extensive plant network will enable us to move livestock between different regions, if required, and minimise disruption to farmers.

Our people have also demonstrated real agility and innovation in managing the risk of COVID-19 over the past two years and we are proud of the way they continually respond to the challenges of the pandemic.

Processing capacity

We are prioritising processing for Platinum and Gold shareholders and encourage you to book space as soon as livestock are at an optimal weight to minimise any impact of a rapid spread of Omicron. This will also ensure we can meet our Easter chilled lamb programme requirements for customers in the UK and Europe. It is important you stay in touch with your livestock rep and provide as accurate and up-to-date information as possible. This will help ensure your livestock rep can provide accurate information to the business using our forecasting tools.

While we currently have sufficient processing capacity and can manage the flow of stock, if any of our plants or supply chain partners are impacted, it’s possible we may not be able to process all stock when required. Therefore, we are asking you to be prepared for longer waiting times and have appropriate feed reserves, particularly with drier conditions in parts of the country.

North Island farmers in particular are experiencing some delays to processing, however we are working hard to manage the impact of this by utilising our plant network.

Our priority is supporting our farmers under these challenging circumstances and working with our supply chain partners so we can continue to export products to our global markets.

Alliance wins Southland business award

We were thrilled to see the efforts of our team, and of the wider Southland business community, recognised in the prestigious Southland Business Excellence Awards held in Invercargill on Friday night.

Finalists in both the Primary and Primary Services Sector and Workplace Well-being categories, Alliance took out the Primary and Primary Services Sector award. This was wonderful recognition of the hard work our team put in every day to build a stronger co-operative for our people and shareholders.

A new record number of businesses applied for the awards last year, showing the depth and breadth of great work happening across Southland. Congratulations to all finalists and winners.

Look out for more coverage of the Awards and winners over the next week.

Premium Wagyu Beef Offer

Alliance Group has launched a Wagyu premium beef programme to our farmers as we continue to build a differentiated portfolio to capture greater value and meet consumer needs across our global markets. The supply programme, for cattle with a minimum of 50 per cent red or black Wagyu genetics, is for farmers interested in high value cattle programmes and in managing stock to optimise marbling and fat colour.

Alliance is partnering with Southern Stations Wagyu (SSW) for the Wagyu programme. SSW will market genetics from its established Australian-based Red Wagyu bulls to New Zealand farmers to inseminate suitable dairy or beef cows or heifers.

The DNA-verified weaned calves will be sold through SSW to approved finishers participating in the programme. SSW’s strategy is to produce fast-growing, efficient converting cattle that thrive on a pastoral-based system and produce some of the world’s finest Wagyu beef. Alliance will provide agronomy support to finishers.

We are offering farmers a premium above the ruling schedule at the time of processing for qualifying stock that meets the requirements for the range.

Carcases must meet certain marbling, pH levels, fat colour and meat colour specifications to achieve the premium, which starts at 40c per kilo and ranges as high as $3.00 per kilo above the schedule price. Please ask your local livestock representative for more information about the programme.

See the recent coverage of the premium beef portfolio, including the Wagyu launch across these media channels:
Rural News interview
Radio New Zealand
Meat processor Alliance launches wagyu premium beef programme to lift returns | Stuff.co.nz

Changes to payment advice

Thank you to shareholders who gave feedback on our remittance advice. It has become clear that some livestock payments should be processed with more supporting information to help farmers reconcile payments.

We have made changes to our system, which will now see you receive kill sheets, store stock invoices and other invoices information to match the actual payment.

If you require assistance on this, please email livestock.admin@alliance.co.nz

Agriculture emissions pricing options – February roadshow

DairyNZ, B+LNZ and Federated Farmers are running roadshows throughout February on the options developed by the He Waka Eke Noa Primary Sector Climate Action Partnership as alternatives to the Emissions Trading Scheme (ETS).
As part of He Waka Eke Noa, every farmer and grower must:

know their farm’s greenhouse gas numbers by the end of 2022
know their numbers and have a written plan in place to measure and manage their greenhouse gas emissions in December 2024

In January 2025, all farms in NZ must be using a system for farm-level accounting and reporting of 2024 agricultural emissions at farm level.

The Government has made it clear that if our sector does not meet the milestones, it will bring agriculture into the ETS, which will be a bad outcome for farmers.

You can find more information on the options here.

Supporting our Pacific neighbours

On 14^th January, Hunga Tonga-Hunga Ha’apai erupted, causing catastrophic damage to Tonga.

We are proud of the cultural diversity across our co-operative, and, in particular, of our very long and strong partnerships with Pacific communities. Across our seven plants we have more than 250 Tongan employees. Our thoughts are with them and their families.

To provide some immediate relief, Alliance has donated $10,000 to the Red Cross Pacific Tsunami appeal and provided product for fundraisers being run by the Tongan community in Oamaru.

Update from our global markets

Lamb

Our focus is now on Easter chilled production for the UK and EU. Retail demand remains firm but ongoing supply chain issues are creating shortfalls, which is causing concern during this pivotal selling period. In the food service sector, growing COVID-19 infection rates mean consumers are looking to dine at home rather than eating out.

In North America, the retail and food service sectors are steady but there is growing concerns over inflation. Consumers are looking to trade down to less expensive protein. In China, demand and pricing have peaked with inventories now matching demand for Chinese New Year (CNY). In the Middle East, demand is steady but pressure is now on pricing.

Mutton

Demand continues to remain firm but pricing is now coming under pressure in all markets as seasonal supply ramps up. China continues to be the pivotal market, but ongoing diversification in other markets is reducing our potential exposure.

Venison

Post-game season negotiations for volume frozen product are underway but market confidence has been dented by the continuing presence of COVID-19 in the key European markets such as Germany and France.

The food service sector is looking to rebuild as restrictions are lifted but some consumers remain resistant to dining out. We are countering this by continuing to build retail programmes in both North America and China.

Beef

With a few days left before the Chinese New Year break, the market is stable across all beef products with steady sales. South American prices have improved slightly over the last two weeks across all cuts although Australia and NZ beef still has a healthy premium in China. Market signals are positive with importers showing interest beyond March production at similar prices to what is currently contracted. The US market is unchanged, with high prices but low import volumes. The market for lean meat from NZ remains strong with bull prices at the same prices as before the Christmas break.

Apart from a brief period in 2019, prices for lean grinding meat are at the highest they have been in the US for 30 years. Due to the latest increase in demand and price from China, grass-fed beef inventory for the rest of Asia is significantly lower than average. Japan, Korea & Indonesia have seen a surge of demand and record spot prices are being achieved.

Co-products/Specialty Ingredients & Materials

Strong wool was +6c on the North Island at a 93% clearance in the mid-January sale, while the South Island was -8c with 29% passed in. Green runners demand and pricing remains strong for sheep and lamb.

Market competition for tallow is driving pricing up with the US underpinning demand. Hides and pelts demand and pricing remains steady.