August 10, 2025 • 9 mins
With the announcement of the Alliance Group recapitalisation due tomorrow, we ask Affco’s national livestock manager why some processors in the industry are making record losses despite record prices for farmers? Plus, is the red meat industry structure model fatally flawed?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Interesting times in the red meat industry. Record prices but
record losses for some meat companies. Have we just got
too many of them? We definitely have too much capacity.
I'm going to get the thoughts of this man who's
a participant in the industry. He's the national livestock manager
for AFCO. His name is Tom Young, and Tom of
(00:21):
the Tally's going to have a ping at the Alliance
Group and eleventh our bid tonight.
Speaker 2 (00:24):
Maybe well, look, I don't think so. Well, I don't know,
and I don't think so, but it's probably another participant.
They'll be looking at that, Jamie. But yeah, it's not
really it's not really at my pay grade. It's a
few levels above me.
Speaker 1 (00:40):
Well, I'm reading from Riley Kennedy's excellent story on Business Desk,
and he said silver Fern Farms was the only domestic
processor to publicly state its willingness to play a part
in the capital race. But it's widely considered that most
of the other big players of which you're wanted AFCO
did so behind closed doors. So you've all had a
(01:02):
bit of a sniffer about it. But would buying the
Alliance Group solve any problems for meat companies. We just
need to rationalize the industry or we just not got
enough critical mass.
Speaker 2 (01:15):
Yeah, well, I think the industry does need consolidation of
some sort, whether that's Alliance or other, you know, other
companies shut plants or a combination of plants. There's no
doubt about it that stock numbers have fallen a lot,
particularly in the last two or three years. So it's
not just the sheep business. You know, the beef numbers
are falling as well in both islands. Yeah, so, you know,
(01:39):
I don't think it's just an alliance problem. It's a
problem we've got. It's a problem solver Feiran's got. It's
a problem probably everyone's gone. Is finding enough stock to
make these plants efficient and keep the labor employed for
five days a week. And that's where probably most of
the issues lie.
Speaker 1 (01:56):
So with record beef prices, let's just look at beef.
Isn't that enough to rekindle more interest in the red
meat industry people maybe change their farming operation to have
more beef in it, for instance.
Speaker 2 (02:10):
Yeah, well possibly, I mean we're certainly seeing a drop
and Bobby cavs being processed, and I think a lot
of them are finding their way into carf rearing operations.
So you know, we will see those, and I suppose
eighteen months to two and a half years time, so
there's a bit of a wait till they arrive. But
certainly I think that the interest is there. But I
(02:30):
think it's just the ongoing changing land use is just
sort of relentless. Every year, probably more and more properties
are just quietly going into trees that we don't know about.
And so you know, just the base base capital stock
of us and cows is not there to keep providing
adequate volumes of stock, and then all the meat companies
(02:51):
are probably well, I suppose I can only really talk
so to speak for Rafkob. You know, certainly the labor's
back now everyone wants a job versus where it was
three or four years ago with COVID. So you know,
the three puts are up, so the efficiencies are back,
and without the volume of stock, you know, you're doing
sort of three or four days a week, and I
(03:12):
think a lot of companies could probably make it work
on four days, or the labor can anyway, But once
you get down to three days of work a week,
your staff on plant just don't don't take enough home
every week to sort of hang around and make that
system work.
Speaker 1 (03:26):
What's the inside oil within the industry, because we're hearing
Irish meat company Dawn meets two hundred and seventy million
for a seventy percent stake. I know you guys talk
tom you bring each other up on a Friday afternoon
to set the schedule.
Speaker 2 (03:41):
I don't think so. I don't think so. I'm not
going to prison to set a schedule. Rest assure of that.
Talk to who talk to Dawn Meats or No?
Speaker 1 (03:49):
What's the one? I mean, what's the inside industry gossip?
Is this a done deal, this Dawn Meats thing?
Speaker 2 (03:55):
Well, I have absolutely no idea, to be quite frank,
and it's pure speculation. So yeah, I don't know. I
can't answer that.
Speaker 1 (04:02):
Well, we'll have a look at some of that speculation
on tomorrow's show. I think nine o'clock tomorrow morning we
find out and we have got the Alliance Group chairman
Mark winn On to explain it. But even if they've
come up with a deal like that time, they've still
got to get the shareholders to vote for it, which
might be a sticky proposition, and then they've still got
to get OIO approval.
Speaker 2 (04:23):
Sure, yeah, I mean that's that's always a challenging thing
to you know, change. I suppose the ownership structure radically.
If that's what it comes down to you. To make
a deal work, You've got to convince existing shareholders that
you know, this is the new way forward, you know. Really,
I mean I can't comment, and neither do I want
to comment too much on Alliance. We've got our own
(04:44):
problems and we do it do things the our way.
Most people know that. But hopefully they can find something
that works for all parties and we wish them the
best to luck with it.
Speaker 1 (04:54):
So are you other meat companies going to pick over
the Alliance carcass? If indeed to hang on, let me
throw this. Let me throw the scenario at you, because
I'm assuming a lot of people have stuck with the
Alliance group because there are one hundred percent farmer owned cooperative.
We know that Silver Fern Farms did a joint venture
with Shanghai Mailing Bright Meats or whatever, so they're only
(05:17):
fifty to fifty now. So this is the last one
hundred percent fully owned farmer cooperative and that was certainly
an encouragement for many farmers to stay in there if
they suddenly become seventy percent owned by an overseas entity,
will those loyal shareholders just go elsewhere?
Speaker 2 (05:36):
Well, I suppose potentially. I mean I can't really answer that.
I guess they've got to be happy with whatever the
dealers going forward. And I guess competition in the meat
industry such that you know, there are always other participants
prepared to pick up clients. Doesn't matter whether it's us
or another meat company, someone will. Someone probably has the
(05:57):
capacity and the wherewithal now to process someone else as stock.
And it's not just it's not just alliances. I mean,
the competition's there amongst all of us to take stock
off each other. And there's a lot of depth to
this game now in terms of you know, last man standing.
There's plenty of capacity, obviously too much capacity, and everyone's
(06:17):
fighting for their last animal to keep their plants.
Speaker 1 (06:20):
You're Tom, and you know this better than eye. The
industry model is flawed. You know, record prices and yet
the meat companies can't make a buck, some of them
having record losses. As I said at the beginning, the
industry model is flawed.
Speaker 2 (06:34):
It is there's probably that's probably a fair comment. I mean,
the only way you can make it work is you
have to have extremely efficient plants. So you need to
have spent a lot of money on your on your
equipment to keep it super reliable, super efficient, and capital
expenditure on new technology where it's needed. You have to
have a very close handle, one you fixed overhead, so
(06:56):
you don't have too many people running around doing nothing
effectively or not not creating value. You have to sell
the product obviously as well as you can to extract
every dollar out of your sales I suppose volume or
in the staff that sell it have to know what
they're doing. So there are quite a few things that
come into it now to make it work. And if
(07:17):
you trip over on any of those sort of metrics,
it's going to be a hard thing to make work.
Speaker 1 (07:23):
Okay, let's finish on a positive note, and that is
the record prices for the farmers for not only lamb
but also beef and Mutton's right up there as well.
I know that for instance, AFCO, you guys have got
a winter contract out or an early spring contract out
at ten dollars fifty. There was talk of an eleven
dollars schedule in the coming season. We're getting a bit
(07:45):
carried away with ourselves.
Speaker 2 (07:47):
Yeah, I think so. Like I mean, ten fifty is
a new record that's in mid October, that's in the
North Island lamb in both islands bouncing around the ten
dollar mark in both islands. Now they're sort of neck
and neck, but it's it's not really not really ten
fifty or ten dollars or even eleven. It's at the
critical time is you know that December January February period
(08:09):
where the farmer that's running the US and rear the
lambs taking the production risk. It's that guy or woman, girl,
whatever you want to call them, who needs to make.
Speaker 1 (08:20):
That's very politically correct with you, Tom, that.
Speaker 2 (08:25):
Person, I suppose what a better tim that person needs
to sort of, you know, hopefully get well paid and
hopefully we see that lamb schedule around at eight dollars
or preps of it better. So the stuff through the
winter months and early spring, those old seasons lambs, it's
not quite as important as that summer price to keep
(08:45):
to keep the breeder interested in doing it again next year.
Speaker 1 (08:47):
Really, Oh, Tom Young out of Azko, thank you very
much for your time today. As I said on the
show tomorrow Mark One, chairman of the lot or chairperson Tom, chairperson,
good person off the alliance there, Oh well, no, no,
that was me. I had to correct myself. There. We'll
get him on the show and just see what sort
of deal they've come up with.
Speaker 2 (09:08):
All I can say from f CAR is good luck
to them and we wish them all be sort of
solution that works.
Speaker 1 (09:13):
Thank you for your time, lovely, thank you
Interesting times in the red meat industry. Record prices but
record losses for some meat companies. Have we just got
too many of them? We definitely have too much capacity.
I'm going to get the thoughts of this man who's
a participant in the industry. He's the national livestock manager
for AFCO. His name is Tom Young, and Tom of
(00:21):
the Tally's going to have a ping at the Alliance
Group and eleventh our bid tonight.
Speaker 2 (00:24):
Maybe well, look, I don't think so. Well, I don't know,
and I don't think so, but it's probably another participant.
They'll be looking at that, Jamie. But yeah, it's not
really it's not really at my pay grade. It's a
few levels above me.
Speaker 1 (00:40):
Well, I'm reading from Riley Kennedy's excellent story on Business Desk,
and he said silver Fern Farms was the only domestic
processor to publicly state its willingness to play a part
in the capital race. But it's widely considered that most
of the other big players of which you're wanted AFCO
did so behind closed doors. So you've all had a
(01:02):
bit of a sniffer about it. But would buying the
Alliance Group solve any problems for meat companies. We just
need to rationalize the industry or we just not got
enough critical mass.
Speaker 2 (01:15):
Yeah, well, I think the industry does need consolidation of
some sort, whether that's Alliance or other, you know, other
companies shut plants or a combination of plants. There's no
doubt about it that stock numbers have fallen a lot,
particularly in the last two or three years. So it's
not just the sheep business. You know, the beef numbers
are falling as well in both islands. Yeah, so, you know,
(01:39):
I don't think it's just an alliance problem. It's a
problem we've got. It's a problem solver Feiran's got. It's
a problem probably everyone's gone. Is finding enough stock to
make these plants efficient and keep the labor employed for
five days a week. And that's where probably most of
the issues lie.
Speaker 1 (01:56):
So with record beef prices, let's just look at beef.
Isn't that enough to rekindle more interest in the red
meat industry people maybe change their farming operation to have
more beef in it, for instance.
Speaker 2 (02:10):
Yeah, well possibly, I mean we're certainly seeing a drop
and Bobby cavs being processed, and I think a lot
of them are finding their way into carf rearing operations.
So you know, we will see those, and I suppose
eighteen months to two and a half years time, so
there's a bit of a wait till they arrive. But
certainly I think that the interest is there. But I
(02:30):
think it's just the ongoing changing land use is just
sort of relentless. Every year, probably more and more properties
are just quietly going into trees that we don't know about.
And so you know, just the base base capital stock
of us and cows is not there to keep providing
adequate volumes of stock, and then all the meat companies
(02:51):
are probably well, I suppose I can only really talk
so to speak for Rafkob. You know, certainly the labor's
back now everyone wants a job versus where it was
three or four years ago with COVID. So you know,
the three puts are up, so the efficiencies are back,
and without the volume of stock, you know, you're doing
sort of three or four days a week, and I
(03:12):
think a lot of companies could probably make it work
on four days, or the labor can anyway, But once
you get down to three days of work a week,
your staff on plant just don't don't take enough home
every week to sort of hang around and make that
system work.
Speaker 1 (03:26):
What's the inside oil within the industry, because we're hearing
Irish meat company Dawn meets two hundred and seventy million
for a seventy percent stake. I know you guys talk
tom you bring each other up on a Friday afternoon
to set the schedule.
Speaker 2 (03:41):
I don't think so. I don't think so. I'm not
going to prison to set a schedule. Rest assure of that.
Talk to who talk to Dawn Meats or No?
Speaker 1 (03:49):
What's the one? I mean, what's the inside industry gossip?
Is this a done deal, this Dawn Meats thing?
Speaker 2 (03:55):
Well, I have absolutely no idea, to be quite frank,
and it's pure speculation. So yeah, I don't know. I
can't answer that.
Speaker 1 (04:02):
Well, we'll have a look at some of that speculation
on tomorrow's show. I think nine o'clock tomorrow morning we
find out and we have got the Alliance Group chairman
Mark winn On to explain it. But even if they've
come up with a deal like that time, they've still
got to get the shareholders to vote for it, which
might be a sticky proposition, and then they've still got
to get OIO approval.
Speaker 2 (04:23):
Sure, yeah, I mean that's that's always a challenging thing
to you know, change. I suppose the ownership structure radically.
If that's what it comes down to you. To make
a deal work, You've got to convince existing shareholders that
you know, this is the new way forward, you know. Really,
I mean I can't comment, and neither do I want
to comment too much on Alliance. We've got our own
(04:44):
problems and we do it do things the our way.
Most people know that. But hopefully they can find something
that works for all parties and we wish them the
best to luck with it.
Speaker 1 (04:54):
So are you other meat companies going to pick over
the Alliance carcass? If indeed to hang on, let me
throw this. Let me throw the scenario at you, because
I'm assuming a lot of people have stuck with the
Alliance group because there are one hundred percent farmer owned cooperative.
We know that Silver Fern Farms did a joint venture
with Shanghai Mailing Bright Meats or whatever, so they're only
(05:17):
fifty to fifty now. So this is the last one
hundred percent fully owned farmer cooperative and that was certainly
an encouragement for many farmers to stay in there if
they suddenly become seventy percent owned by an overseas entity,
will those loyal shareholders just go elsewhere?
Speaker 2 (05:36):
Well, I suppose potentially. I mean I can't really answer that.
I guess they've got to be happy with whatever the
dealers going forward. And I guess competition in the meat
industry such that you know, there are always other participants
prepared to pick up clients. Doesn't matter whether it's us
or another meat company, someone will. Someone probably has the
(05:57):
capacity and the wherewithal now to process someone else as stock.
And it's not just it's not just alliances. I mean,
the competition's there amongst all of us to take stock
off each other. And there's a lot of depth to
this game now in terms of you know, last man standing.
There's plenty of capacity, obviously too much capacity, and everyone's
(06:17):
fighting for their last animal to keep their plants.
Speaker 1 (06:20):
You're Tom, and you know this better than eye. The
industry model is flawed. You know, record prices and yet
the meat companies can't make a buck, some of them
having record losses. As I said at the beginning, the
industry model is flawed.
Speaker 2 (06:34):
It is there's probably that's probably a fair comment. I mean,
the only way you can make it work is you
have to have extremely efficient plants. So you need to
have spent a lot of money on your on your
equipment to keep it super reliable, super efficient, and capital
expenditure on new technology where it's needed. You have to
have a very close handle, one you fixed overhead, so
(06:56):
you don't have too many people running around doing nothing
effectively or not not creating value. You have to sell
the product obviously as well as you can to extract
every dollar out of your sales I suppose volume or
in the staff that sell it have to know what
they're doing. So there are quite a few things that
come into it now to make it work. And if
(07:17):
you trip over on any of those sort of metrics,
it's going to be a hard thing to make work.
Speaker 1 (07:23):
Okay, let's finish on a positive note, and that is
the record prices for the farmers for not only lamb
but also beef and Mutton's right up there as well.
I know that for instance, AFCO, you guys have got
a winter contract out or an early spring contract out
at ten dollars fifty. There was talk of an eleven
dollars schedule in the coming season. We're getting a bit
(07:45):
carried away with ourselves.
Speaker 2 (07:47):
Yeah, I think so. Like I mean, ten fifty is
a new record that's in mid October, that's in the
North Island lamb in both islands bouncing around the ten
dollar mark in both islands. Now they're sort of neck
and neck, but it's it's not really not really ten
fifty or ten dollars or even eleven. It's at the
critical time is you know that December January February period
(08:09):
where the farmer that's running the US and rear the
lambs taking the production risk. It's that guy or woman, girl,
whatever you want to call them, who needs to make.
Speaker 1 (08:20):
That's very politically correct with you, Tom, that.
Speaker 2 (08:25):
Person, I suppose what a better tim that person needs
to sort of, you know, hopefully get well paid and
hopefully we see that lamb schedule around at eight dollars
or preps of it better. So the stuff through the
winter months and early spring, those old seasons lambs, it's
not quite as important as that summer price to keep
(08:45):
to keep the breeder interested in doing it again next year.
Speaker 1 (08:47):
Really, Oh, Tom Young out of Azko, thank you very
much for your time today. As I said on the
show tomorrow Mark One, chairman of the lot or chairperson Tom, chairperson,
good person off the alliance there, Oh well, no, no,
that was me. I had to correct myself. There. We'll
get him on the show and just see what sort
of deal they've come up with.
Speaker 2 (09:08):
All I can say from f CAR is good luck
to them and we wish them all be sort of
solution that works.
Speaker 1 (09:13):
Thank you for your time, lovely, thank you
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