Rural delivery: Divvying up cash sad solution for lagging industry

By PETER DAVIES and IAN LAWRENCE*

Sheep Research Foundation chairman Robin Campbell, in a Rural Delivery column on October 1, made a strong argument for the need for farmer participation in research.

This could be done by a commodity levy but we would support the growing belief by many farmers that such a levy could, and should, be underpinned by a trust fund, established from Wool Board reserves.

Dairying, the fastest growing pastoral land use in New Zealand, is making progress based on higher productivity and research.

Research has found ways to achieve greater production from each unit - whether per hectare or per cow - and by improving processing efficiency.

It has also created whole new products from the raw material. The proportion of milk that is sold as traditional commodities, such as powder and cheese, is constantly diminishing. This has resulted in more markets and better returns, which in itself has encouraged the uptake of research to gain greater productivity.

The wool industry lags seriously in this second area of research.

The knowledge for improved on-farm productivity is there and being used by many. But it is the marketing of a more diverse range of products other than just wool and meat that needs to be addressed.

How many farmers realise that the Wool Research Organisation of New Zealand, through its "Keratec" project, can break wool down into its component parts and reconstruct it into a fibre of any predetermined diameter, of constant micron and of any length? Or that those components may be employed in whole new uses.

That is the hope for the future - not just producing more of the same.

"The reserves are my money and I want them," is the cry from some growers. But it has no validity.

During the war years wool was compulsorily acquired. After the disposal of New Zealand's share of the wartime stockpile in 1952, the Wool Commission got a capital sum of £26,596,116 - the profit from the stockpile plus interest.

This reserve fund formed the capital base for the commission's subsequent activities in setting and maintaining price levels for New Zealand wool, particularly at auction.

Since 1991, the Wool Board has concentrated on marketing, research, development, and promotion and has used some of the capital and interest to finance these activities. In June last year the reserves stood at $117 million.

Because of the difficulties in quantifying the benefits of these activities and a perception that money had been wasted, some producers believe that "their" share of the reserves would be better in their own pockets.

But no guarantee exists that those people would spend the money in pursuit of better returns for wool.

We feel very strongly that the remaining reserves belong to the industry and should not be distributed to present woolgrowers.

Apart from a very few elderly growers, today's sheep farmers have no valid claim to the reserves. Recent entrants to farming could not ethically accept such a distribution.

We seriously doubt that any farm owners budgeted the value of their perceived share of the reserves when purchasing their property; so they have no right to feel aggrieved.

Paying out the reserves, either by distribution of capital or shares, to present growers is virtually privatisation of an industry asset. In progressing the industry it would probably be as successful as electricity reform and the privatisation of Air New Zealand.

The liability for tax in the event of a return to growers is not certain, so 33 per cent or more could go to the IRD.

Our industry's need to finance and encourage research and development is widely accepted. We have fallen far behind fibre competitors and dairying.

After setting up Wool Interiors and Ovita, a fund of about $50 million could be available. Devoting the interest earned to research and development would be a significant start.

The money is there and available, if we have the will. We would be irresponsible not to use it for the good of the industry.

* Peter Davies and Ian Lawrence are executive members of Federated Farmers Bay of Plenty meat and fibre section.