Silver Fern Farms says its partnership with Shanghai Maling should result in higher, more stable returns for farmers – but New Zealand First and even Federated Farmers are advising caution.

'Federated Farmers sees the proposed investment in a joint venture with Silver Fern Farms as an overwhelming vote of confidence in our red meat industry,” says President Dr William Rolleston, 'however we are encouraging Silver Fern Farms' shareholders to carefully consider the offer.”

Photo: File.

While the offer would potentially strengthen the business and offers potential for further growth in the Chinese market, Dr Rolleston insists there are key issues for shareholders to work through ahead of the special general meeting on October 16.

'Silver Fern Farms buys and processes a considerable proportion of New Zealand's beef and lamb,” he adds, 'so we need it to be sustainable and successful.

'The proposed joint venture has the potential to create significant opportunity, but shareholders need to consider the offer in detail.

'There are a lot of factors that will ultimately determine whether this is the right deal for shareholders, and not all of them are clear from what has been announced.

'Key questions include what value has been placed on Silver Fern Farms' significant body of intellectual property and whether a strong emphasis on the Chinese market will prove restrictive if that market weakens?”

New Zealand First spokesperson for Trade and Commerce Fletcher Tabuteau says many industry insiders believe Chinese SOE buyer Shanghai Maling will use its financial strength to outbid for livestock, and eventually cripple Kiwi processors.

'Shanghai Maling is China's largest meat processor and is partly owned by Bright Food Group, China's largest food company,” explains Fletcher. 'It's a business owned by the Chinese government, so there are very deep pockets.

'The government claims competition will increase. First, it is not another firm entering the market, and second it is simply a buy-out. No additional competition will exist.

'This deal could herald a whole new era for the meat industry, and despite what the PM maintains, will bring little benefit to New Zealand.

'Sheep and beef producers may get some initial uplift, but the end result will be lower prices under a monopoly owned in China. The Australian meat market is an example of how effectively this has been achieved by a foreign company.

'The government refused to even meet Silver Fern Farms, our biggest beef exporter, when it was seeking investment. The Prime Minister and the Finance Minister have done nothing for the Kiwi co-operative, because the PM says it is a private company.”

Yesterday Rob Hewett, Chairman of Silver Fern Farms, said that the traditional industry model hasn't consistently delivered for farmers or processors over a sustained period of time.

'Our shareholders and farmer suppliers believe in our added value strategy,” says Rob, 'but the key missing link has been a strong financial position from which to execute.

'We have arrived at a position where we have a genuine, game-changing opportunity for our business.

'We have a partner who supports our strategy, wants us to accelerate, has the resources and relationships to help us specifically in China, and will provide us with significant capital to put us in a position of not only financial sustainability, but one of strength.

'It will enable us to reinvest in the business in a manner we simply cannot achieve by ourselves. The end result should be higher, and more stable returns from the plate to the pasture.

'We are excited about what this partnership can bring to the business, to our shareholders and to supplying farmers.

'I truly believe this partnership will be a defining moment for our business and the co-operative as a whole.”