KEY POINTS:
The Meat Industry Action Group has forced special meetings to vote on merger talks at co-operative processors Alliance Group and Silver Fern Farms.
And the resolutions have teeth.
The action group is calling for shareholder support for the creation of a single farmer-owned co-operative, for the boards to
work together to create a national champion and for more meetings in March to remove and re-elect all directors.
The resolutions also call for a constitutional committee to meet at least every two weeks to oversee the design of a national champion and with a chairman appointed by the action group who has the power to exclude anyone not representing the wishes of shareholders.
Very sharp teeth indeed.
The resolutions appear designed to achieve three fundamental objectives - confirm farmer support for a co-operative merger, create an environment to get it done and, if necessary, remove directors who stand in the way.
The resolutions had to be strong if the special meetings were to be anything more than an exercise in chin wagging.
Alliance turned down an opportunity to merge with Silver Fern Farms last year, a bigger industry mega-merger proposed by Alliance fell over in April and a Meat & Wool New Zealand taskforce set up to develop a sector strategy was shut down last month lacking consent.
There has been a lot of talking, failed initiatives and recrimination.
The action group's objective is the creation of a farmer-controlled, market-led company that accounts for 80 per cent of red meat procurement, processing and marketing.
Action group chairman John Gregan says the structure of the industry is fundamentally flawed and a merger of co-operatives is the starting point to a bigger national champion.
"By having a large national champion and farmers committed to that company it makes procurement less of an issue," Gregan says. "Suddenly the industry becomes driven by market ideals, we're able to invest in R&D and top quality management."
Alliance chairman Owen Poole says the resolutions are restrictive, prescriptive and take insufficient regard of directors' obligations to act in the best interests of the company. He says the synergies of a merger with only Silver Fern Farms were not good enough.
Meanwhile, Silver Fern Farms has agreed to sell half of itself to listed rural services business PGG Wrightson for $220 million in a deal promoted as creating a pasture to plate supply chain and a platform for rationalisation.
Alliance is not attracted to the PGG Wrightson proposal and has significant reservations, including loss of farmer control, governance and the hybrid model.
Alliance will hold its special meeting in September and Silver Fern Farms' meeting is likely to be after a vote expected in September on its deal with PGG Wrightson.
The PGG Wrightson deal needs at least 75 per cent approval, compared to the action group resolutions which need more than 50 per cent.
Gregan says farmer control is not negotiable and the action group could not support Silver Fern Farms' proposed equal partnership, but adds farmers may have to give up some ownership and PGG Wrightson is willing to cut its stake if other players such as Alliance get involved.
The action group has put a solid alternative on the table and farmers could in theory have both - corporate involvement followed by a bigger single co-operative.
But corporate ownership is an issue for some farmers who, though desperate to see change, may start shifting attention from PGG Wrightson and towards the action group initiative.
The false dawns of change may be coming to an end.
TANGLED WOOL The Wool Exporters Council is attacking new operator The Wool Company on multiple fronts, including the appointment of former Telecom chief executive Theresa Gattung as chairwoman.
The Wool Company was set up to revitalise the struggling sector and combined the wool operations of listed rural services business PGG Wrightson with prospective farmer co-operative Wool Grower Holdings.
Council executive manager Nick Nicholson said Gattung's performance at the company launch showed she knew nothing about the sector and most of her comments were nothing short of appalling.
John Henderson, chairman of the council which represents about 84 per cent of exported wool, kept up the attack , reminding the sector that while at Telecom Gattung once spoke to analysts about using confusion as a marketing tool to maintain profit.
Then exporter Peter Crone chipped in, saying Woolmark's economic service was at odds with comments made by Gattung. Crone says New Zealand is naive if it thinks it can battle against a massive downturn - where filament yarn makers were hit by record oil prices inflating material costs and a crashing housing market - by providing eco-friendly wool.
Gattung resigned from Telecom in February, 2007 after seven years in charge. Her legacy is not a bed of roses.
Shortly after Gattung took over at Telecom shareholder equity was $2.16 billion but by 2007 it dropped to $1.38 billion and during her time at the helm the share price fell 42 per cent.
She may have been telling analysts an industry truth about pricing but it certainly was not good marketing.
The telco sector is a complex, evolving beast and Gattung would be likely to debate the reasons behind company performance and what constitutes success in such an environment.
But the buck stops with the chief executive.
And that will be one of Gattung's most important tasks as chairwoman for the Wool Company - find and hire the best possible chief executive.
Wool Grower Holdings chairman and sheep farmer James Aitken says Gattung was the first choice as chairwoman.
"Does Theresa have to know intimately how to shear a sheep? No she doesn't. Does she have to bring good, basic, sound business principals to this business? Of course she does. Has she got them? Absolutely," Aitken says.
The Wool Exporters Council has also hit out at the new entity as having little wool marketing experience but Aitken, who studied marketing at university before becoming a farmer, says there is currently precious little genuine marketing of wool.
"I just would love to be pointed in the direction of somebody who is marketing, not selling, strong wool."
There are some good small initiatives but nothing of volume, he adds.
"We need people who absolutely understand and have mastered marketing because what we've got to do is market the wool," he said. "Any fool can sell it."
PGG Wrightson would initially have a 50 per cent equity stake in the new company and 40 per cent voting right, with 60 per cent for Wool Grower Holdings and it was hoped other industry players would get involved.
Aitken says some farmers now look at wool as merely a by-product and are lucky if the price they get covers the cost of shearing.
The industry can stand and stare at this fundamental fact, stick with the status quo and will surely watch the industry fail.
Or the sector might be lucky with returns boosted by factors beyond its control.
Alternatively the sector could change the picture, do something different and try to get more control of the future.
Farmers should listen carefully to the concerns and opinions of the experienced exporters but in the end what have they got to lose by changing tack?
And the Wool Company is pitching them an alternative.
The council also warns growers about the loss of the auction system with no going back and no second chance.
Wool Grower Holdings chairman Aitken says he envisages an auction will remain for those farmers that want it but he hopes most customers and suppliers will move to a direct contracting system.
The auction system works but does not provide marketing signals and frustrates buyers who cannot get precisely what they want, he says.
Aitken has been farming for 30 years but says he would not have a clue where his wool is used.
"It's not for want of asking," he says. "The only market signals we seem to get at the moment is you should have been in last month's auction, not this month's."
If the new company proves to be worse than the current situation and farmers want out, then it is hard to imagine that somebody with a scent for profit would not quickly re-establish an auction system.
But if the current situation means no profit for growing wool anyway, then how big is the risk?
