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Brief Bites, 19th June

Alliance Farmer Shareholder News
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In this edition:

  • United Kingdom and Europe visit
  • Alliance’s Pure South venison and Lumina Lamb showcased
  • North Island flooding
  • Agriculture emissions pricing recommendations released
  • Know Your Numbers Workshop
  • Southland woolshed meetings
  • Christchurch Supper Club - Ronald McDonald South Island
  • NAIT levies 
  • Global market update
 

United Kingdom and Europe visit

Pictured from left: Alliance UK and Europe Regional General Manager Donna Smith, Trade and Export Growth Minister Damien O’Connor and UK Secretary of State for International Trade Anne-Marie Trevelyan.
Alliance General Manager Sales Shane Kingston and I recently travelled to Europe and the UK to reconnect with our customers, spend time with our team in the UK and visit various trade channels to understand the trends and conditions post-COVID-19. Both the EU and UK remain important markets for all of our products, particularly now for beef with the recently signed UK Free Trade Agreement. Negotiations are also continuing for a potential FTA with the EU.
 
Our UK business continues to go from strength to strength. We are deepening our partnerships with customers and increasing our presence across all the available channels. While retail such as Tesco, Sainsbury’s, Asda, Marks & Spencer and Ocado remain our largest channel, food service is developing quickly as we expand past the traditional ‘bricks and mortar’ restaurant segment into new and emerging sectors such as home delivery, stadia and events. 
 
The red meat category within the UK marketplace is forecast to continue to grow and we look forward to benefiting from this expansion. Some exciting recent developments include increasing our branded offerings presence in retail and significant new product ranges in food service. These have been developed in response to less and lower skilled kitchen staff following the pandemic and consumers seeking excellent and personalised experiences. 

Having our local team in the marketplace allows us to understand first-hand these market trends and create and capture value for our customers and our co-operative.
 

Alliance’s Pure South venison and Lumina Lamb showcased

Criffel Station, Wanaka.
Our New Zealand team continues to connect leading chefs with our passionate farmers. Alliance’s Pure South venison was showcased this weekend on TVNZ’s series A New Zealand Food Story, which features award-winning chef Ben Bayly travelling the country to seek inspiration for the menus at his restaurant. In episode six, Ben visited Alliance farmer-shareholder Mandy Bell of Criffel Station to find out the secrets of producing New Zealand’s finest venison. You can view the episode here.

Ben Bayly also visited Coleridge Downs in mid-Canterbury to hear more about Lumina Lamb. You can see this episode here.
 

North Island Flooding

Our thoughts are with those farmers and rural communities affected by flooding. Some areas of the lower North Island have had significant rain so far in June with the Horowhenua region in particular significantly impacted.

Our livestock and processing  teams worked hard to support farmers. We re-arranged processing, with some unaffected farmer shareholders agreeing to hold their livestock back so that processing space could be given to flood-affected farmers. Saturday overtime processing at our Levin plant  was also offered to affected shareholders.
 

Agriculture emissions pricing recommendations released

Last week, the He Waka Eke Noa Primary Sector Climate Action Partnership – including Beef + Lamb NZ (B+LNZ) and the Meat Industry Association (MIA) along with other agriculture and Māori farming organisations – released its recommendations to the Government on an agricultural emissions pricing system as an alternative to the Emissions Trading Scheme (ETS).
 
The recommendation for a farm-level levy system is significantly better than agriculture entering the ETS and gives farmers influence over their future.
 
The Government will now decide whether it will accept this recommendation.
 
What has been recommended

  • A farm-level levy system which recognises what individual farmers are doing on their farms 
  • Farmers would calculate their methane and nitrous oxide emissions based on what they’re doing on-farm, not based on national averages 
  • Unique prices for both methane and nitrous oxide have been recommended – this recognises they’re separate gases with their own targets and progress, and importantly will delink them from the fossil fuel-driven ETS carbon price
  • The recommendation is for a maximum 11c per kilo starting price for methane and that it be held for three years. This is to provide some certainty and recognises a cautious approach is needed to avoid significant impacts on farm profitability
  • Farmers can get credit for their sequestration
  • Farmers will also get incentive payments taken off their costs for using technologies and practices that reduce emissions
  • The money raised in the system will go back into research and development for further agricultural emissions reductions
 B+LNZ modelling reinforces the need for a cautious approach on pricing. Their more detailed additional modelling indicates that the He Waka Eke Noa modelling underestimated the impacts on sheep and beef farm systems’ profitability and therefore the emission reductions likely to occur at the prices modelled by the programme. 
 
The ETS is not an appropriate solution for the red meat sector. It does not capture the meaningfully different impacts of different gases from agriculture and it’s important we get the split gas approach recognised.
 
Nor does the ETS recognise on farm sequestration, which is a key part of our farming systems. Putting agriculture into an ETS would have a significant impact on our sector, farming families and rural communities.
 
For more information, please visit: The recommended He Waka Eke Noa option complements our own plans to decarbonise our seven processing plants and secure a low emissions future for the co-operative.
 
In 2019, we announced we would end the use of coal at our plants within 10 years. We have an Energy Transition Pathway that will lower our carbon footprint by 77 per cent (from the 2018/19 base). Our comprehensive investment programme includes:
  • An electrode boiler to reduce the use of existing coal fired boilers at Lorneville, saving 11,739 tonnes of carbon per annum
  • Replacement of the existing main coal fired boiler at Mataura with a high temperature heat pump system and small diesel boiler used only for peaking, saving 6,401 tonnes of carbon per annum and significantly improving the air quality for local residents
  • A heat pump at our Pukeuri plant in North Otago
  • Capturing waste heat from the refrigeration plant at Smithfield to replace coal use for process heat, saving 3,811 tonnes of carbon per annum.
 

Know Your Numbers Workshops

As part of He Waka Eke Noa, all farmers will be required to know their greenhouse gas (GHG) number by the end of 2022. This is in preparation for agriculture emissions being priced by 2025. Beef + Lamb New Zealand is running a series of workshops over the next month. To find a workshop in your area, please visit the B+LNZ events page.
 

Southland woolshed meetings

We are looking forward to getting out around Southland over the next two weeks for our Woolshed meetings. Please speak to your livestock representative if you are interested in attending a meeting at one of the locations below and they can provide further details.

Please note the time change for this week's meeting (was 2pm, now 1pm).
 
Date Town Time
Thursday 23rd June Lumsden 1pm
Monday 27th June
Otautau

10am
Wyndham 2.30pm
Tuesday, 28th June
Lawrence

10am
Otama 2.30pm
 

Christchurch Supper Club - Ronald McDonald South Island

Alliance is proud to be the major sponsor of Ronald McDonald House South Island, the independent charitable organisation providing free accommodation and support to families who need to travel to Christchurch and Invercargill for their children’s medical treatment. This is a charity that has touched the lives of  a number of our farming and employees’ families.
 
Through the charity’s Supper Club events in Invercargill, Christchurch and Queenstown, we showcase our farmers’ product to top chefs and hundreds of diners and help RMHSI raise hundreds of thousands of dollars to support the communities we are part of.
 
The Christchurch event on Friday night saw guests enjoy delicious Pure South Lamb. During each event, each participating restaurant is drawn out of a ballot and randomly matched with each table of guests. This is the restaurant where they will dine for the evening.
 

NAIT levies

The NAIT Limited Board has approved an increase in NAIT levies below what was proposed in the NAIT levies consultation in January and February.

Under this lower funding option, NAIT has adjusted the proposed levies, while maintaining the 35%/65% Crown/industry split. From 1 July 2022, the tag levy will increase from $0.90 to $0.97 (consultation proposal was $1.35) and the slaughter levy will increase from $0.50 to $1.49 (consultation proposal was $1.77). These new cattle levy rates align with the agreed dairy/beef industry split. Yearly contributions from the Crown will increase from $2.14m to $4.34m and from $120,000 to $249,000 for the deer industry.

Please visit here for more information.
 

Update from our global markets

Lamb

Geo-political unrest such as the Ukraine war is continuing to drive inflation to record highs. This has caused a reduction in disposable income with consumers looking to trade down to lower value proteins. The global supply chain issues remain challenging. China coming out of lockdown will support the market, however there is also the risk of another lockdown. The markets in the UK, EU and North America are showing signs of stress with inflationary pressures causing some anxiety and affecting the protein spend. In the Middle East, the market is hesitant as exporters diversify away from China into this region.

Mutton

Global mutton markets are easing, led by a COVID-19-related drop in consumption in China, which has created a short term inventory build. We continue to focus on diversifying product into Malaysia, North America, EU and the UK.

Venison 

Production to complete key account frozen business for the 2022 Game season and other key markets such as China and North America is continuing. Negotiations are progressing for the 2022 chilled Game season with the market improving on last year. Global supply chain remains critical for the timely delivery of chilled and frozen venison for the pivotal Game season. Ongoing diversification into China and North America will not only support the market, but also provide shipping route options away from the traditional EU markets
 

Beef

The market in China remains challenging as the country comes out of a severe lockdown. The strict COVID-19 policy in China has dented confidence and the significant lockdowns have created uncertainty. Demand remains firm for beef cuts. The summer season means less demand for bone items (hotpot is popular in cold winter months). Prices for beef cuts are stable with bone items decreasing slightly. There are no changes in the US market with importers continuing to talk prices down. Prices have reduced from $3.20/lb to $2.92/lb for 95cl in the last six weeks and we are aware of some exporters taking positions at these levels. Despite this, prices remain at levels 20 per cent above the five-year average and the high domestic processing volumes point towards a tight market in Q4 2022 and early 2023. New Zealand and Australia both have a lot of room left on their US quotas (NZ is 32 per cent complete and Australia at 14 per cent). Asian market demand remains firm across beef cuts and lean/fatty trimmings. Korea and Japan continue to provide opportunities to move both lean and fatty trimmings at strong values.

Co-products/Specialty Ingredients & Materials

Hide prices are down significantly from eight weeks ago, driven by the lack of demand from China, with the risk of further lockdowns. The Strong Wool price indicator dropped 17c on the North Island and there was no sale in the South Island. Tallow prices remain strong and are expected to strengthen off the back of a weakening NZ Dollar.

 

Warm Regards


David Surveyor – Chief Executive
 

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