Supplier Update 16 December 2022
As we close in on the final weeks of the year I want to acknowledge the challenges we have collectively faced and the hard work that has gone in across the supply chain, from the farm right through to our markets. After a year like 2022, everyone has earned a well-deserved break but we acknowledge there is still lingering uncertainty.
I particularly want to acknowledge the disruption that has occurred across our network in recent weeks. In the last two supplier updates I have mentioned Covid as it rears its head again across the country and the need to prepare for its inevitable impact on staffing numbers. In the last update we talked more specifically about the actual Covid related reduction of available capacity versus last year – for example we experienced a 20-30% reduction in sheepmeats and 12% reduction in beef for the first two weeks of December.
We understand that this has had serious consequences for farmers who had lamb weaning planned in these weeks, and this disruption could not have come at a worse time. Lost processing capacity can happen quickly, and we have had experiences where we have lost 50% of a single processing site’s capacity within 24hrs.
We take your concerns around weaning seriously, and are working hard to quickly get capacity back to normal levels. At the same time we are prioritising weaning drafts and our loyal, fully shared and valued suppliers. Everyone in the business is focused on this. The most acutely impacted stock class has been South Island lamb, where our capacity reduced by 50% for the weeks of 28 November and 5 December versus the same weeks last year. Things have improved this week, with lamb capacity across the country back to 80% of last year’s capacity. We expect to be back to 100% of planned processing capacity in the first week back, but the trajectory of Covid across the holiday period is unknown and remains a risk. At present we're also monitoring some North Island communities with increasing Covid numbers.
What makes the current situation more challenging is the early flow of lambs this season, with twice as many waiting to be processed compared to 2021. It is difficult to determine actual wait times due to the immediacy of the Covid disruptions and the changing livestock forecasts. As soon as this stabilises, we will endeavour to communicate wait times.
I want to stress again that everyone should prepare for longer delays to get stock processed as we manage the risks above and work through the large backlog of animals. Our Livestock Reps are doing their absolute best working within these processing space constraints and I want to acknowledge and thank them for all their hard work in this high pressure environment - I am sure you appreciate their hard work too this season.
I would also like to recognise the entire team at Silver Fern Farms who have kept a sharp focus on balancing processing throughput while maximising value from every carcase we have processed. We have lifted or held our processing market share across all stock classes and achieved record farmgate returns. This has been achieved in a global environment that continues to be as challenging as ever.
In this report we’ve published a pricing outlook through to March. Market pricing across the board has continued to contract since our last farmgate pricing outlook. We are seeing signs of prices beginning to stabilise, however it is early days for this to be impactful. We are confident that as China relaxes from its zero-Covid policy setting, and the USA works through its beef inventory, that the underlying demand will remain strong and that farmgate prices will rebound.
As this is our final update for the year I wish you, your families, and wider farm teams a very merry Christmas, and a happy and safe festive season. 2022 has been an exceptional year in many ways but despite the challenges we’ve enjoyed mostly outstanding returns for farmers until recently, and a profitable year for the business enabling record investment in our future. Despite some headwinds in the year ahead, we are resolute on continuing our business strategy and this investment is a core part of this.
Silver Fern Farms is grateful for your support in 2022, and ready to face 2023 by your side.
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