Dairy farmers fear shift in direction

By GLENYS CHRISTIAN

A dairy farmer who declared he used to be a businessman before he changed occupations did not get a very warm response at a Rotorua meeting.

But the actions of the country's largest dairy company, the New Zealand Dairy Group, must have many of the businessmen who are its shareholders wondering exactly what light it sees them in.

The cause of the controversy is a series of meetings for southern shareholders held in the week leading up to the official abandonment of the proposed mega cooperative, with notice being sent out on March 20 when the concept was still very much alive.

The subject of the meetings - suggested changes to the Dairy Group's governance structure - is seen by some shareholders as a rapid route to corporatisation, despite their continued support for a single dairying entity retaining cooperative principles.

To add insult to injury, no similar meetings have yet been held in the north, although the company promises that a general sounding-out of views on a number of issues will occur shortly.

The company is looking at reducing the present 17 board directors to between 10 and 12, still with a farmer majority, and at an expanded role for a supplier council of 30 to 40 farmers to replace the old supplier representative system.

But the matter most concerning farmers such as Chris Sutton, the Rotorua-Taupo chairman of Dairy Farmers of New Zealand is a proposal to move to an A and B share structure as a way of dealing with the continuing problem of new milk supply.

This would involve existing suppliers swapping every 10 of their shares for nine A shares and one B share. The A shares would be issued only once and new suppliers of milk would have to purchase B shares from their holders.

The B shares would give a payment based on the returns from the company's manufacturing, commodity trading and ingredients businesses, while the A shareholders would receive returns from quota markets, investments and consumer businesses.

It is estimated that milk covered by the B shares will receive around 30c a kilogram of milksolids less than the A shares.

Farmers could trade them among themselves, but it is the potential for the A shares getting into other than dairy farmers' hands that worries Mr Sutton, as he believes this could happen in "a blink of an eye."

Other northern dairy farming leaders do not react with such alarm but still want to take a long, hard look at what is being proposed as soon as they can.

The results of clear inter-industry communication were well shown at another producer meeting, this time in Tauranga, when kiwifruit growers gathered to celebrate the change to a more corporate structure.

Prime Minister Helen Clark did not stint in her support of single sellers, saying she had always seen their value and would continue to back them - "as long as that is what the industry wants and probably beyond."

Doug Voss, chairman of the old Kiwifruit New Zealand and the inaugural chairman of the new Zespri Group, said the industry had succeeded in negotiating its way through the minefield of producer board reform because, "we did it our way."

As businessmen treating businessmen like businessmen, not farmers.

Glenys Christian can be contacted on email at glenys@farmindex.co.nz.