Major cooperative losses and low global consumption are a sign of the times for our meat industry, say local farmers and accountants.

Alliance Group announced a $95 million loss earlier this month.

Around $48 million of that number was “one-off post-tax costs” following business restructuring, inclusive of wrap up costs for the Smithfield Plant.

Federated Farmers Mid Canterbury President David Acland said it reflected the current climate for sheep and beef farmers.

“There are lots of questions it poses, and none of them have easy answers.”

He said the knock-on community effects, like contract losses for local businesses connected to the plant, were starting to be felt.

But the industry has felt pressure to change, whether from markets or plant owners, for decades.

“You look at the objectives farmers had for processors over time - when we had lots and lots of animals, that required large plants.

“The loss of peak kill capacity will influence how farmers get rid of stock, and how the market works.”

A red meat season outlook released by Beef + Lamb New Zealand expects New Zealand’s exports to decrease across the board in the coming year.

China’s consumption of our meat is not expected to pick up, which leaves a chunk of our farmers “financially fragile,” accountant and agribusiness advisor Pita Alexander said.

“New Zealand sheep and beef farming profitability has always gone through a pattern of up and downcycles.

“The problem now, though, is that the potential downcycles involve substantial potential working capital deficits at year end.”

For the average commercial meat farmer to survive well, he said they’d need low debt, at least 5,500 stock units, and “to farm in the firm belief that profitability is a very close second to breathing,” amongst other things.

“To be long-term sustainable, the commercial sheep and beef farm net profit in the report needs to at least triple from the 2024-2025 year net profit report estimate of $45,200.”

He stressed that this situation wasn't the fault of the government or farmers, and simply a lack of difference between red meat sale value and the cost to get it on shelves.

If the Beef + Lamb report proves accurate, the government will have to take more of an interest in the sector as it makes up over 20% of New Zealand’s exports.

It would likely see further drops in sheep numbers, a need to diversify exports, and “a few more freezing works closing down.”

Alliance Chairperson Mark Wynne said the company’s loss was “disappointing,” and reflected the global trade situation, particularly for lamb meat.

Wynne said there has been a lot of work done to build the company’s financial resilience and improve its offering to farmers.

“We have now turned a corner on a tough two years.

“We have seen positive signs in the past few months and we are now forecasting a return to profitability in the current financial year.”

By Anisha Satya