Farmer picks hole in analysis

By Philippa Stevenson

A farming leader says dairy company shareholders are getting insufficient detail on industry structural options to make an informed decision.

Dairy Farmers of New Zealand chairman Mark Masters said a critical review of a report crucial to the mega co-op proposal raised his suspicions about the rigour of Dairy Board analysis.

The board has said dairy earnings could rise by $300 million a year - and the $8 billion industry become a $40 billion one in a decade - by integrating manufacturing companies with the exporter.

Tonight, in Te Awamutu, it will continue to spread the message to farmers in a series of meetings which started last week.

A December 1998 report commissioned by the board from the New Zealand Institute of Economic Research (NZIER) found that a single marketer exporting 95 per cent of the country's dairy products would see "premium revenue to the value of $245 million per annum accrue to the industry."

The study examined expected results from three competing marketers and found a premium of around $89 million per annum or, compared with the single company, a bottom-line loss of $156 million per annum.

Their report was commissioned by the Government's Producer Board Project Team, an group assessing producer board deregulation proposals.

It said the NZIER's central thesis was that the board could derive an advantage from being the dominant exporter through the exercise of market power.

However, Mr Masters said the review raised suspicions about how much critical analysis the board's work on the mega co-op had been subjected to before it was taken to farmers.

"The board has a responsibility, if it is saying price destruction will occur in the marketplace, to come up with much better evidence than it has to date."