Three groups of chicken farmers growing chickens for Tegel Foods has called on a government commission to authorize them to carry out collective negotiation of contracts in future.
Last week, the Commerce Commission of New Zealand published a preliminary statement on a request from a group of chicken producers to carry out collective negotiations with the nation’s leading poultry processor.
In September, the application was made by the New Zealand Tegel Growers Association Incorporated (TGA) to allow the group to negotiate terms and conditions for its members to supply chicken growing services to Tegel Foods Limited. The contract would be valid for a 10-year period.
According to the Commission, it may grant a provisional authorization under a section of the Commerce Act relating to the coronavirus (COVID-19) pandemic. Specifically, this is covered by the COVID-19 Response (Further Management Measures) Legislation Act 2020. In effect, a provisional authorization has the same validity as a full authorization. However, it is of limited duration while a longer-term authorization is considered.
Tegel Foods submitted a report on its position earlier this month, and the closing date for submissions from the TGA has now passed.
Growers propose collective negotiation of contracts
TGA is an industry association, according to Scoop. Its members represent about 75 chicken growers in three regional poultry industry associations — those of Greater Auckland, Taranaki, and Canterbury. These producers supply chicken growing services to Tegel.
Among the country’s largest chicken processors, Tegel outsources its chicken production to contract growers. These farmers are located near to the firm’s poultry processing facilities in Auckland, New Plymouth, and Christchurch. Under the conditions of this arrangement, Tegel provides the day-old chicks, and specifies the conditions for the birds to be reared.
According to the TGA, New Zealand consumers would benefit if the association were authorized to conduct collective bargaining with the poultry processor. Not only would it reduce the costs of negotiating supply terms and conditions, TGA claims it would also bring efficiency benefits, reports Scoop. TGA does not expect its proposal to have any adverse effects on the market through reducing competition.
Tegel opposes proposal
In its submission to the Commerce Commission, Tegel Foods opposes the proposal from its growers.
According to Tegel, the provisional authorization process was designed to help businesses manage the immediate impacts of the response to COVID-19. Specifically, the COVID-19 Response (Further Management Measures) Legislation Act 2020 was intended as a quick solution to emergency situations arising from the pandemic.
For its part, Tegel contends that the application for provision authorization by the TGA should not be passed for four reasons.
Firstly, the company say, events giving rise to the TGA action pre-date the pandemic. Second, it sees no reason for an urgent need to carry out the processes sought by a provisional authorization. Rather, the call for urgent action is the result of the TGA’s own failings, alleges Tegel. Finally, the company asserts that there would be no public benefit in overriding the current “freely negotiated contractual arrangements.”
Part of the New Zealand government, the Commerce Commission is scheduled to rule on the issue by March 25, 2022.
More on Tegel Foods
Founded in 1961, Tegel Foods now has 2,300 employees across New Zealand, according to the firm’s own web site.
With annual slaughterings of 58 million birds, Tegel Foods ranks fourth in terms of chicken meat production in Oceania, according to WATTPoultry.com’s Top Poultry Companies database.
Tegel Foods is New Zealand's largest poultry producer with 50% market share, as well as 90% for turkey. Strong exports also have driven recent growth.
A fully integrated poultry business, Tegel has breeder flocks, hatching, feed milling, slaughter, processing, further processing, and cooking operations — all within New Zealand.
Two months ago, Tegel Foods warned of a significant rise in chicken prices for New Zealand consumers. According to the company’s sales manager, a 10% price hike was needed to cover the rising costs of poultry production, particularly feed, labor, and fuel.
