Farmers begin to ask, why change?

By Glenys Christian

Over the gate


When is an announcement not an announcement? When the long-awaited document says that talks between the country's two largest dairy companies are making "steady progress."

Friday's missive was just another mark along the way of what has to be one of the most protracted set of negotiations ever seen in agriculture.

Nothing is ever simple in the dairy industry because of its cooperative nature and the fact that more than 14,500 people are all equally entitled to their say, but when it comes to piecing the proposed mega co-op together many are now quietly shaking their heads in disbelief.

Some farmers strong on business acumen are beginning to wonder what is wrong with the status quo.

They point to the fact that in the past it was the foreign exchange dealings of the Dairy Board which proved its undoing, a scenario not likely to be repeated because of a variety of economic, political and accountability pressures.

And a long-term solution could be agreed among all industry players on the second issue, the problem of increasing milk supply.

The country's largest dairy company, the New Zealand Dairy Group, has a moratorium which lasts through until June 1 next year, but it will still have to deal with a predicted 7 per cent boost in milkflows annually in the South Island.

Resolve both these issues and the benefit could well be an extra dollar a kilogram of milksolids - plenty to be going on with when it has been revealed to some farmers' shock that the financial benefits of the mega co-op have not been nailed down quite as firmly as they had believed.

Dairy farmers are asking whether they really want to go the way of the rest of the world, merging into larger and larger multinationals all expanding their business at more than 15 per cent a year. They ask how all can achieve this aim and if there are not bound to be some losers.

They suggest that with modest milk growth of 3 per cent a year, more balanced options may be possible if the grand vision of industry leaders for a $40 billion business was scaled back.

Instead of striving for free market goals supposedly available to all but attained by so few, maybe the dairy industry needs to ditch the dogma.

After all, how did it get to where it is today? The answer is by holding on against the odds and confounding critics by racking up success where only failure was thought possible.

Might not a continuation of the cooperative, single-seller structure of the industry, which farmers have always been reluctant to let go of, be after all the most realistic way forward?

Perhaps the election result has something to do with it.

If seven Greens can make it to Parliament thanks to voters rounding on their critics, who says the dairy industry cannot pull something just as surprising out of the bag?

The Dairy Board has been criticised for being slow-moving, inefficient and working in practice but not in theory.

But maybe now that rhetoric can be firmly put aside. Perhaps the dairy industry already has the right structure to prosper in the new economic and political environment where it may not be required to have the correct ideological tags attached.

* Glenys Christian's e-mail address is glenys@farmindex.co.nz