FEEDBACK SURVEY March 2014 0800 327 646 FED FARM.ORG.NZ
INTRODUCTION In December 2013 Federated Farmer released Meat Industry Options: A Discussion Paper to our membership. The paper was an initiative of the Federated Farmers Meat and Fibre Industry group and its aim was to stimulate informed debate around the future of the New Zealand red meat industry. The paper was followed by a member survey, the results of which are contained in this report. These survey results will be used to shape the current and future work of Federated Farmers in this area. We value our members feedback and our dialogue with them will continue to be on going.
CONTENTS 1.0 Survey Respondents...2 2.0 Livestock Supply Arrangements...3 3.0 Point of Contact...5 4.0 Source of Price Information...6 5.0 Company Strategy...7 6.0 Factors Influencing Supply Decisions...8 FEEDBACK SURVEY www.fedfarm.org.nz Page 1
1.0 SURVEY RESPONDENTS The Federated Farmers Meat Industry Options feedback survey was completed by 414 people. Of the 414 respondents 308 identified their primary industry as Sheep and Beef and 65 identified their primary industry as Dairy, see Figure 1 below. 187 of the respondents are members of Federated Farmers provinces in the North Island and 217 are from provinces in the South Island see Figure 2 below. RESPONDENTS BY INDUSTRY RESPONDENTS BY LOCATION Other 10% Dairy 16% North Island 46% Sheep and Beef 74% South Island 54% Figure 1: Respondents by Industry Figure 2: Respondents by Location FEEDBACK SURVEY www.fedfarm.org.nz Page 2
2.0 LIVESTOCK SUPPLY ARRANGEMENTS Of the total survey respondents 77% are supplying livestock at least on a seasonal basis (63% annual, 14% seasonal). That level of commitment increases to 84% (67% annual and 17% seasonal) if you exclude the dairy respondents see Figure 3 below. SUPPLY ARRANGEMENTS Seasonal 14% Spot Market 23% Annual 63% Figure 3: Supply Arrangements Dairy respondents are more likely to supply the spot market than sheep and beef respondents with 53% of dairy respondents supplying the spot market compared with 17% of sheep and beef respondents see Figure 4 below. One possible explanation could be that for dairy farmers meat income from the sale of cull cows and bobby calves is a secondary income stream and therefore being able to sell them when they need to may be considered more important than establishing a long term supply arrangement. INDUSTRY VARIATION IN SUPPLY ARRANGEMENTS Annual Seasonal Spot Sheep and Beef 67 17 16 Dairy 45 2 53 Figure 4: Industry Variation in Supply Arrangements There is also noticeable geographic variation with regards to livestock supply arrangements. The rate of annual commitment is much higher in the South Island with 71% of South Island respondents commit livestock on an annual basis, compared with 54% of North Island respondents. North Island respondents were also more likely to use the spot market with 31% of North Island respondents supplying livestock via this channel, while 15% of South Island respondents use this channel see Figure 5 below. This result could possibly reflect the greater range of processing options available in the North Island. FEEDBACK SURVEY www.fedfarm.org.nz Page 3
GEOGRAPHIC VARIATION IN SUPPLY ARRANGEMENTS Annual Seasonal Spot North Island 54% 15% 31% South Island 71% 14% 15% Figure 5: Geographic Variation in Supply Arrangements Interestingly for those respondents who identified receiving the highest price on the day as the number one factor influencing supply decisions (see section 6) 34% of them supply livestock via the spot market and 59% supply livestock on an annual basis. This result suggests that even amongst the segment you would most anticipate to play the market, there is belief that committed supply will deliver higher returns. These results are also supported by the results of the 2013 Federated Farmers Farmer Behaviour Survey which was completed by 865 farmer members. That survey found that 63% of respondents had not changed who they supplied in the last 3 years, suggesting high levels of loyalty. It also revealed some interesting information with regards to levels of commitment and contracted supply. For lambs and sheep: 53% of the livestock numbers respondents had sold or expected to sell that season were committed but not contracted to one company. While 18% were contracted to one company. That gives a total of 71% of the sheep and lambs for which respondents were selling that season were either committed or contracted to one company. For cattle: 54% of the livestock numbers respondents had sold or expected to sell that season were committed but not contracted to one company. While 11% were contracted to one company. That gives a total of 65% of cattle for which respondents were selling that season are either committed or contracted to one company. This result is encouraging as Federated Farmers and many others continue to call for committed supply. It shows that reasonable levels of commitment do already exist in the industry but there may be questions to be asked of all parties (farmers, stock agents, and processing companies) about the level of communication which accompanies this commitment. FEEDBACK SURVEY www.fedfarm.org.nz Page 4
3.0 POINT OF CONTACT Of the total survey respondents 70% stated their first point of contact when supplying livestock to processing companies is a company livestock representative. For 24% of respondents it is an independent agent and for 6% it is a procurement manager see Figure 6 below. POINT OF CONTACT Independent Agent 24% Procurment Manager 6% Company Livestock Representative 70% Figure 6: First point of contact when supplying processing company For those respondents who supply livestock via the spot market 53% have an independent agent as the first point of contact. Which is over double the proportion of total respondents using independent agents. FEEDBACK SURVEY www.fedfarm.org.nz Page 5
4.0 SOURCE OF PRICE INFORMATION Of the total survey respondents for 39% the primary source of price information was the company schedule, for 38% it was an agent, 13% got their price information online, 8% used the newspaper, and 2% relied on word of mouth, see Figure 7 below. However, there were also many comments identifying that multiple sources were used to gather price information. PRICE INFORMATION Word of Mouth 2% Agent 38% Company Schedule 39% Online 13% Newspaper 8% Figure 7: Primary Source of Price Information When the source of price information was broken down by industry it was interesting to note that for 67% of dairy respondents the primary source of price information was from an agent. While for sheep and beef respondents only 30% had an agent as their primary source of price information see Figure 8 below. When the results are broken down by supply arrangements, for those respondents who supply the spot market 65% source price information from an agent and only 9% use the company schedule. While for those who supply livestock on an annual basis, 51% of respondents have the company schedule as their primary source of price information and for 31% it is an agent, see Figure 8 below. PRICE INFORMATION Company Schedule Newspaper Online Agent Word of Mouth Dairy 17% 10% 2% 67% 3% Sheep and Beef 44% 8% 16% 30% 2% Spot Market 9% 13% 11% 65% 3% Annual Supply 51% 7% 10% 31% 2% Figure 8: Price Information by Industry and Supply Arrangement FEEDBACK SURVEY www.fedfarm.org.nz Page 6
5.0 COMPANY STRATEGY Respondents were asked if they could describe the strategy of the company they supplied and if they considered company strategy to be important. Of total respondents 43% of people can not describe the strategy of the company they supply yet 80% of people consider that strategy to be important. That means there is 23% of respondents who consider company strategy to be important, yet can t describe the strategy of the company they supply see Figure 9 below. This raises some questions regarding the current level of engagement between suppliers and companies is and also how much consideration goes into understanding what is important to the suppliers business and how that aligns with the company they supply. It also suggests there is plenty of work to be done if we are to close that gap in order to align supplier and company values and get fundamental shifts in behaviour. The gap of people who consider company strategy to be important but can t describe the strategy of the company they supply is further accentuated amongst dairy respondents. The gap for dairy respondents was 42%. With 69% of respondents considering company strategy to be important but only 27% being able to describe it. 31% didn t consider company strategy to be important accounting for some of the 73% who could not describe the strategy of the company they supply. Encouragingly 96% of respondents who ranked company marketing strategy as the most important element in supply decisions say they consider company strategy to be important. However, only 80% of these respondents can describe the strategy of the company they supply, once again highlighting the gap between where people are currently and where they would like to be in terms of understanding strategy. UNDERSTANDING COMPANY STRATEGY Important, Can Describe Important, Can t Describe Not Important, Can t Describe All 57% 23% 20% Figure 9: Understanding Company Stratey FEEDBACK SURVEY www.fedfarm.org.nz Page 7
6.0 FACTORS INFLUENCING SUPPLY DECISIONS The average ranking for all respondents of the most important factors when they are making supply decisions (higher ranking considered more important) were: 1. Relationship with drafter (3.47) 2. Loyalty to company (3.36) 3. Guaranteed killing space (3.08) 4. Company marketing strategy (2.83) 5. Spot market price on the day (2.26) (Respondents were asked to rank each of the 5 factors based on its importance to their business decision making. The average ranking was then calculated. The highest possible ranking is 5 if every respondent had said that was the most important factor, with the lowest possible ranking is 1.) When the respondents were broken down based on their supply arrangements there were some significant differences in the ranking of factors influencing supply decisions between those respondents who supply livestock on an annual basis and those who supply the spot market see Table 1 and Figure 10 below. Table 1: Factors Influencing Supply Decisions by Supply Arrangement Annual Suppliers Spot Market Suppliers 1. Loyalty to a company (3.59) 1. Relationship with the drafter (3.77) 2. Relationship with the drafter (3.4) 2. Spot market price on the day (3.43) 3. Guaranteed killing space (3.23) 3. Guaranteed killing space (2.89) 4. Company marketing strategy (2.93) 4. Loyalty to a company (2.59) 5. Spot market price on the day (1.87) 5. Company marketing strategy (2.33) FEEDBACK SURVEY www.fedfarm.org.nz Page 8
SUPPLY DECISION INFLUENCES BY SUPPLY ARRANGEMENTS All Respondents Annual Suppliers Spot Market Suppliers 3.47 3.4 3.77 3.36 3.59 2.59 3.08 3.23 2.89 2.83 2.93 2.33 2.26 3.43 1.87 Relationship with Loyalty to company Guaranteed killing Company marketing Sport market price drafter space strategy the day Figure 10: Factors Influencing Supply Decisions by Supply Arrangement The ranking of factors impacting supply decisions for those whose first point of contact when selling livestock to processing company is an independent agent or company livestock representative can be seen in Table 2 and Figure 11 below. Table 2: Factors Influencing Supply Decisions by Point of Contact Independent Agent Company Livestock Representative 1. Relationship with drafter (3.83) 1. Loyalty to company (3.59) 2. Guaranteed killing space (2.97) 2. Relationship with drafter (3.4) 3. Spot market price on the day (2.86) 3. Guaranteed killing space (3.11) 4. Loyalty to company (2.70) 4. Company marketing strategy (2.88) 5. Company marketing strategy (2.64) 5. Spot market price on the day (2.02) FEEDBACK SURVEY www.fedfarm.org.nz Page 9
SUPPLY DECISION INFLUENCES BY POINT OF CONTACT All Respondents Independent Agent Company Livestock Representative 3.47 3.83 3.4 3.36 2.7 3.59 3.08 2.97 3.11 2.83 2.64 2.88 2.86 2.26 2.02 Relationship with Loyalty to company Guaranteed killing Company marketing Spot market price drafter space strategy on the day Figure 11: Factors Influencing Supply Decisions by Point of Contact The fact that relationship with the drafter is never ranked lower than 2 for any of the survey segments highlights just how important personal relationships are when making supply decisions. FEEDBACK SURVEY www.fedfarm.org.nz Page 10
Federated Farmers of New Zealand Level 6, Wellington Chambers PO Box 715 Wellington 6140 Tel: 04 473 7269 Fax; 04 473 1081 0800 327 646 FED FARM.ORG.NZ