New Zealand's biggest meat processor and exporter, Silver Fern Farms, is putting its beef contract prices on hold for a month because of a plummeting beef market.
The farmer-owned cooperative is not prepared to make losses in a market which has dropped 25 per cent in the past six weeks.
Farmers had indicated to The Press last week that SFF, formerly PPCS, appeared to have walked away from having its Backbone rolling eight- month contracts renewed monthly.
Because of volatility in the international market, SFF said it was unable to confirm the November application for the next eight months of beef supply due to start this month.
SFF chairman Eoin Garden said it would have been irresponsible of the cooperative to issue the eight-month contract from December because of the fall in overseas beef prices.
He said there would be a one-month loss of contracted supply, but farmers would still be able to supply beef on the spot market and through the beef schedule.
"The beef market has taken a huge hit and the American bull beef price has moved [over the past few months] from US200c a pound to US117c a pound yesterday."
Garden said applications would be accepted this month for the next eight-month contract starting in January at a lower price.
SFF contracts for lamb and venison set last month have been confirmed and will go ahead.
Garden said the intention of the Backbone system had always been to identify consumer demand and match it with supplies from farmers.
"The guaranteed pricing was based on the market demand and that is the concept we are moving to.
"We are no longer production and throughput driven. We do not want to be product makers going around the globe and wondering where we are taking this product."
He said farmers would be affected by the non-issue of the December leg, but lamb and beef suppliers did not expect to subsidise "unrealistic" contract prices which would make a loss for all shareholders.
"We cannot challenge the profitability and the viability of the company . . ."
Federated Farmers Meat & Fibre chairman Bruce Wills said farmers were disappointed because they had initially thought their first written application was the contract.
Farmers feel their good faith was not being returned, but understood the volatile nature of the beef market, he said.
"The situation is unfortunate because farmers were supportive of the Backbone concept when it was floated as a way to build better relationships between farmers and processors.
"This hiccup is a bump in the road to achieving these ends and having withdrawn these contracts means a lot of farmers are upset."
Backbone documentation says applications for the supply of stock are not contractually binding until they are accepted in writing by Silver Fern Farms.
SFF said the global beef market was grossly oversupplied with little demand, but it expected that stability would return to the beef market in the new year.
