December Farmer Update

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AFFCO

FARMERS’ UPDATE

DECEMBER 2021

FARMER UPDATE

AFFCO RAISING MONEY FOR MOVEMBER The AFFCO team have been looking rather hairy over the last month, but the sacrifice they have made has raised over $78,150 (final totals will be known at 9.00am on the 10th of December) for MOVEMBER. The team at AFFCO have embraced the cause, and would like to take this opportunity to thank our extremely supportive suppliers who took the time to have a conversation, or to make a donation to the AFFCO team or their Livestock Buyer. Special mention must go to our Livestock Buyer in the Taupo/Tokoroa region, Brad Woodford who raised a staggering $5,475.00, and to our Regional Livestock Manager for the lower North Island Marcus Henson not far behind on $4,390.00. Movember is the leading charity changing the face of men’s health on a global scale, focusing on mental health

and suicide prevention, prostate cancer and testicular cancer. The New Zealand arm of Movember supports a number of programmes which includes; Farmstrong, headfirst, Man Enough, Oranga Tu and True North Testicular Cancer. AFFCO are extremely proud to support such a worthy cause.

Marcus Henson

Brad Woodford

2022 REGIONAL FIELD DAYS As you maybe aware we have already had one cancellation being the Southern Field Days in Waimumu due to the uncertainty with events in the current climate. However at the time of writing the rest are going ahead, and the details are below and we so look forward to seeing our suppliers at these events. We will be utilising the same site entry system as last year- so please take the time now to download the AFFCO Livestock App. If you downloaded the app last year- you will be all set to go as the passes will be automatically loaded a little closer to the event. If you are using the AFFCO Farmers website, please ensure

you print your pass closer to the event. For those that are unable to download the App or don't have access to the Farmers website we will have the cards as we did last yearhowever please fill in your supplier number prior to arrival as this will make things slightly quicker. The quickest and simplest way to enter is using the AFFCO Livestock App. NORTHLAND FIELD DAYS WANAKA SHOW CENTRAL DISTRICTS FIELD DAYS

3 - 5 March 11- 12 March 17- 19 March


A MESSAGE FROM OUR CEO & NATIONAL LIVESTOCK MANAGER

We areof now well intotaken the swing of processing the new season. for employees company alike. We have which activelyhave encourMany you have advantage of ourfor South Island and North Island $9 and lambthewinter supply contracts, Our nine meat processing sites, along with our AFFCO owned aged and assisted all of our employees to get vaccinated, been extremely well supported. European and North American lamb sales contracts which we secured in Autumn which altanneries alliedthe co-product plants, are now operating at or contracts has included iwi health providers and vaccination teams lowed us and to lead market and release these lamb supply early.having Remember, these are minimum price connear visit late our sites, andspot ferrying employees to receive tractsfullsocapacity. no pricing risk is borne by you the supplier - in the event winter pricing exceedsoffsite contract pricingtheir levels vaccinations. Currently approximately 85% of our employees we will pay at the higher market level – but at the moment our contract levels still look very strong. This is the time of the year when our plants and staff experience have received either one or two vaccinations, and we are running the most pressure, with the demand for processing space a big a competition whereby one employee from each plant with a We arein now progressively our factories repairs and Many of our cash employees have driver day-to-day decisionshutting making. down A significant strengthfor ofannual vaccination levelmaintenance. of 90% receives a $25,000 prize. All up worked extended hours and weekends to ensure livestock has been processed on a timely basis throughout the season, AFFCO is our ability to process big volumes of livestock each this is an incentive pool of $250,000 across our plant network and have theseason. opportunity to enjoy a well-earned the nextour couple of months will be juggling bookings weeknow during peak This capacity is critical in the break. Over to encourage employees to getwe vaccinated. and channelling livestock to those plants we have open. Aside from shipping issues, obtaining sufficient labour in our summer months when stock needs to be moved off farm. factories continues a significant to AFFCO, and across the industry.our This situation made worse AFFCO has a spread to of present plants across the Northchallenge Island, with From a livestock perspective, buyers have is continued to work seven sites processing a mix of ovine and bovine stock classes. tirelessly to support both our suppliers and AFFCO – we have by well the publicised immigration constraints currently faced by many primary industries. Unfortunately in some cases We have two processing sites inof thefarmer South returns Island. This spread great team trustcutting they have looked after you well over the this is resulting in an erosion as we are of forceda to work to and simpler specifications, or render some plants minimises our risk, along with your risk, during the course of the year. Due to Covid, our annual round of supplioffal items which should be saved and sold. uncertain times we currently face. er meetings had to be cut short, although we did manage to complete number ofgearing meetings theour North Island, were Whilst cattle and lamb processing levels are seasonally declining, we areacurrently upinfor bobby calfwhich processLike other industries, the meat processing industry is currentwell supported, and we enjoyed the opportunity to catch up with ing season. If you have not yet registered, please contact your local AFFCO livestock buyer. ly experiencing issues sourcing sufficient labour, and AFFCO many of you. Our recent transition to more direct business, has not been immune to this. However, our Operations team and elimination of third-party business, has been smooth and Finally, asaalways wesetting thank us you continued loyalty. Wewell value your business and don’t it for granted. have done great job upfor foryour the new season. It is supported, demonstrating thetake mutual benefits of a direct becoming more and more important that suppliers support us all relationship for both suppliers and AFFCO. Overall, the level Kind Regards, year round so we can build and maintain a pool of skilled labour of support we have received from you all throughout the season throughout the year. We need stock through winter and into suggests that our service has been well received, and our pricearly spring to bring the plants up to full processing capacity by ing competitive, which is of course our aim. During the winter late November. As such during peak season when capacity is months we were proud to offer our loyal suppliers New Zeatight we aim to support and repay the loyalty shown by those land’s first $10 lamb contract, which allowed us to pass back the suppliers who supply us throughout the year. returns which our marketing team achieved through accessing niche markets. As we look back over 2021, it’s been a successful year for AFFCO after managing to navigate the numerous challenges In closing, if your animals are ready to process, we would suggest faced – Covid, shipping disruption, and labour shortages, to that you get them booked in immediately. The world remains name just a few. We continue to invest heavily in our plants very unstable, and it is impossible to predict either future liveto increase our consistency and efficiency of production, and stock values, or our ability to consistently process, sell, and ship to improve our environmental footprint – we have recently products to export markets. replaced our Moerewa coal-fired boiler with a bio-mass (wood pallet) boiler, and we have committed to replace a further two Thank you for your support during the year, it is never taken for coal-fired boilers in the near future. This will shortly leave us granted. We would like to wish you all the best for the summer with just one small coal-fired boiler remaining, and means that months and a profitable season on the farm. AFFCO has committed to an 86% coal use reduction by 2023. From an AFFCO Head Office perspective, being located in Hamilton has meant that many of our employees have been forced to work from home for significant periods of time in order to reduce Covid related risks. This has been challenging

All markets continue to show significant demand for New Zealand Beef and Lamb. However, it is an extremely interesting time - most buyers are very aware that supply lines globally are under pressure due to the ever-present impact of COVID, but at the same time are nervous about the inconsistency of their own demand, for the very same reason. Large customers are aware that any new wave of the pandemic during the Northern Hemisphere Winter could result in problem inventory, but likewise are projecting to be short if their markets stay open. Labour shortages across the industry are affecting all processors. AFFCO are focussed on maximising potential throughput for the coming peak season to support farmer suppliers. In some cases, we are simplifying our cut-planning to support volume throughput, and while this may sub-optimise value, we believe it will be necessary to maintain a reasonable level of throughput. With labour, throughput and freight service all conspiring against us customers have been advised not to plan on typical peak volume surplus and product availability. Demand for Lamb continues to be firm with all sections of the animal having at least two major markets vying for volume. As mentioned earlier, labour issues are increasing costs and necessitating cutting simplification at our plants, however ensuring we can maximise volumes to market is the priority.

Similar to the situation outlined in the last market commentary, China and USA are showing particularly strong demand as restaurant trade grows while supply from the traditional large suppliers – Brazil, Argentina and Australia – remains limited. It is expected that supply from Brazil will soon be re-established into China and while this may adjust some of the current shortage, the growing consumption of beef by Chinese consumers should underpin demand going forward. Bull and Manufacturing Cow grinding meat demand remains strong into the USA while the logistical challenges, to the West Coast in particular, remain. As a result, AFFCO have recently confirmed a further two charters of conventional reefer vessels for early in 2022. We believe this is a critical investment being made by AFFCO to help manage the risk to suppliers over the coming summer months. On top of this, China has recently returned to the buying table for grinding beef which should help maintain the pricing needed to mitigate some of the additional costs.

At this point we are halfway between our off-season volumes and peak-season volumes. At time of writing, we are able to secure containers and vessel space to keep up with production, however our approach is very-much ‘Hope for the best, but plan for the worst’. The next two charter vessels represent this planning, and we expect to charter a further four before the end of the season.


HAVE YOUR SAY ON FARM EMISSIONS New Zealand has committed to reducing the greenhouse gases it produces. To this point we have lacked clarity on how farming will be brought into New Zealand’s wider emission plan. The He Waka Eke Noa partnership are working with all industry members to develop alternative pricing options to the Emission Trading Scheme (ETS). Farmers are best placed to measure and manage their emissions, but AFFCO believe the default pricing model (ETS) won’t recognise the work our suppliers have already completed to reduce emissions. The alternatives developed by He Waka Eke Noa are a Farm-levy based system and a Processor-level hybrid levy. See the link for detail on the alternatives Pricing Options. These pricing options will have major impacts on how we farm and process meat in the future, with emission’s charges coming into effect in 2025. We encourage all suppliers to attend the He Waka Eke Noa events discussing the alternatives being run in February 2022. We will keep you posted on confirmed dates for your region, or you can keep an eye out using the links below; Events - Dairy NZ Events - Beef+Lamb HOW WILL EMISSION’S PRICING IMPACT MY FARM? To get to grips with the proposed emission pricing alternatives, you first need to understand how they will impact your farming operation. If you haven’t already worked out your farm’s emission levels, use the link below to go the free Beef + Lamb calculator. The Beef + Lamb site has a range of resources to help you get the information you need to calculate your number. GHG Number I KNOW MY NUMBER NOW WHAT? Once you know your number the next step is to have a plan to measure and monitor your emissions. Beef + Lamb have a climate change module in their farm plan templates here; Beef + Lamb Farm Plan. NEED A HAND TO DEVELOP A PLAN? AFFCO have partnered with Beef + Lamb to run online Climate Change Action Plan workshops. The events in November saw a good number of our suppliers take advantage of the opportunity and we have one date left in December - so sign up now; December 9th - 10.00am - 11.30am Beef + Lamb also run Online Climate Change Action Plan Workshops as part of their own event calendar. See the link below for dates/times still available. Beef + Lamb Online Climate Change Action Plan Workshops