AFFCO
FARMERS’ UPDATE
FEBRUARY 2022
FARMER UPDATE
A MESSAGE FROM OUR CEO & NATIONAL LIVESTOCK MANAGER
As we write this, we are heading into further uncertain times. The Omicrom variant of COVID is spreading quickly throughout New Zealand, and it is very likely it will cause disruption across the supply chain all the way from the farmgate through to export markets. It is unknown as to how this will ultimately affect the processing industry, but AFFCO has processes and systems in place to manage this risk as best we can. Amongst other things, we are currently putting in place a Rapid Antigen Testing (RAT) programme so that vaccinated workers who are ‘close contacts’, and who test negative on a daily basis, can continue working in line with the governments recently announced Phase 2 rules. AFFCO has the advantage of an extensive network of multi-species plants spread across the country, so is better placed than many other processors to handle any potential disruption. We have included in this update how stock pick ups will be handled on farms where there are confirmed COVID infections or close contacts, and we would encourage you to familiarise yourself with these protocols. On the positive side of things, both Islands have received some well needed rain, and are in good shape for the middle of February. The grass that is being grown now will enable us to smooth livestock volumes across the processing season and take the pressure off suppliers, who up until recently were facing severe drought conditions in some areas. Prices for red meat and co-products remain strong globally and this is reflected in very strong summer Schedule pricing. We hope you will find our attached market update informative. Unfortunately, the gloss is being taken off export market returns by continued international shipping and supply chain disruption, which is causing delays and additional costs getting our products to export markets. To reduce our reliance on international shipping lines, and to assist in easing this pressure, we have continued our programme of non-containerised conventional vessels, which are being chartered directly by AFFCO to take our products to North America – more on this in our market update.
From a labour perspective, an absence of foreign labour due to border restrictions is creating a shortage of workers across all primary industries. The meat industry and AFFCO are not immune to this, and we currently face immense pressure given our heavy reliance on process workers to staff the chains and keep the stock flowing through our plants. Despite being short of well in excess of 300 workers, our Operations team and employees continue to do a fantastic job under the circumstances. To aid recruitment and retention of employees, we have recently increased our pay rates, and implemented a weekly bonus system for processing workers who attend work for the full working week without absence. We would like to thank all our suppliers for their patience, as most of you understand the challenging situation that the industry currently faces. We continue to prioritize direct business over third-party supply, with direct business enabling us to work with suppliers on a year around supply volume relationship, and to reward loyalty. Despite all the current challenges, the feedback we are receiving is that current market returns are translating into kill sheets which suppliers are very happy with, which is great to hear - at the end of the day our aim is to get the best market returns and pass those back to suppliers. We are hopeful this season will see a more normal autumn, and we can head into winter with good feed levels. As mentioned earlier, demand for red meat has never been stronger, so while other parts of the economy such as hospitality and retail have really been struggling, we remain in a very positive sector, continuing to provide a high quality product that the world wants. All the best,