AUSTRALIA'S only farmer-owned beef processor was in the spotlight during the big cattle turnoff of 2013-14, when queues for service kills had its chains running at capacity for nearly two years straight.
Now the Northern Co-operative Meat Company (NCMC) at Casino, NSW, is facing a tight year or two as the cattle tide runs out, and record saleyard prices test the loyalty of the operators it relies on to keep the kill chains moving.
Until cattle supply stabilises, NCMC will depend on the loyalty of producer and operator members, and the robustness of its diversified businesses - it also operates veal and pig chains, and a tannery - to stay profitable.
The months ahead will also be a test of the farmer co-operative model championed by Agriculture Minister Barnaby Joyce, and given prominent attention in the Agriculture Competitiveness White Paper.
Formed in 1933, NCMC has been upheld as an alternative to the dominant processor model, where big operators either slaughter their own stock or support big clients based on economies of scale.
When supply was plentiful and cattle prices poor, NCMC offered an alternative: a venue for producers or independent brands to slaughter their own stock, and trade the resulting beef with or without help from NCMC’s marketing arm.
“It was well and good to be a processor when cattle prices were low,” said NCMC chief executive Simon Stahl.
“Now that cattle prices are at record highs, it’s not as attractive, and it won’t be attractive for at least another 12-18 months.”
The co-operative has provided incentive payments to its suppliers on the back of the last two years of high throughput, but its main strategy for retaining business is by putting the “service” into service kill.
Offering service kills is complicated, involving changing meat pathways and box lids often several times a day. That makes killing at NCMC more expensive, but the co-operative backs up its processing with a marketing arm that has a global reach, and a rare willingness to take on niche marketing assignments. Some jobs have been measured in pallets, rather than containers.
After two years of good profitability, the co-operative has the capital to invest in new ways of doing business. But having looked at alternatives, the board instead opted to set up the existing business for the next decade with investments in areas like the cold store and kill floor efficiencies.
In keeping with the co-op philosophy of looking after the community it operates in, NCMC has also returned 1.2 per cent of net earnings to the community with donations to not-for-profits like the Westpac Rescue Helicopter ($50,000), Our House ($25,000), local junior sports clubs ($10,000) and local rural shows.
Another decade will take NCMC past its 90th year. It represents the sort of business every rural community would like to have on its doorstep, but how viable is it to build co-operatives from scratch in the 21st Century?
For new beef processing co-ops, Mr Stahl’s assessment is that it would be “possible, but extremely difficult”.
It might be a $80-$100 million investment, with sizeable debt to be serviced. The kill chain would need to be highly utilised. The sort of ebb in cattle supply that will cause NCMC discomfort could quickly finish off a new, highly-leveraged operation.
And NCMC has other advantages that no greenfields co-operative works can hope to replicate; not least that over the past 80 years it has imprinted co-op culture into northern NSW livestock production. NCMC chairman John Seccombe is a fourth-generation co-operative member, his father was also chairman of NCMC.
NCMC is just one of several thriving North Coast NSW co-ops. It recently joined a co-operative alliance with Norco, Ballina and Macleay fishermens’ co-ops, NSW Sugar Co-op and Summerland Credit Union.
“We decided to work together for a common cause,” Mr Seccombe said, “and look at ways we can improve employment opportunities in the region, how we can improve the productivity of our members, and what infrastructure we might help improve, like the NBN service.”
On the North Coast, the benefits of working co-operatively can be seen in the streets of every town. For those with ambitions to build co-operatives in other places, that culture will generally have to be built from scratch.
That might prove a greater challenge than raising the finance.
Why not a Federal Minister for Co-operatives?
Judging by the level of enquiry to the executive of Northern Co-operative Meat Company (NCMC), people are keen to build more co-operatives. So why not a Federal Minister for Co-operatives?
NCMC chief executive Simon Stahl thinks this would be ideal, but if that can’t happen, there at least needs to be a special government department to help guide the development of new co-ops, and to help educate the wider community about their social benefits.
“The messages we’re getting are all about ‘get big or get out’,” Mr Stahl said.
“But in most farming communities, that’s obscene. Why not pool your assets and get big together? Or do we want a few massive conglomerates owning rural Australia?”
“People are loving the idea of 21st Century co-operatives. We get a lot of enquiry about building co-ops for beef vertical integration. We go ‘yes, but it’s tricky’.”
Part of the reason it’s tricky is the legal minefield that has to be negotiated, usually for months, before any real work on co-op building can start.
A department charged with streamlining this process would help new co-operatives survive the fledgling stage, NCMC board chairman John Seccombe said.
A champion for co-ops might also help embed the concept, and the culture, more firmly in Australia’s business environment.
“It has to start back in business school, and be taught that co-operatives are a legitimate form of business,” Mr Seccombe said.