Mega confidence on dairy co-op

By PHILIPPA STEVENSON agricultural editor

Dairy farmer leaders are confident that the proposed Global Dairy mega co-op will win approval from the cabinet on Monday.

That is when Agriculture Minister Jim Sutton is scheduled to present a weighty report on the industry's proposal to create the $10.5 billion company - the country's biggest - to Government ministers.

The document is the result of more than three months' work on the plan, announced in December, to merge industry giants Kiwi Dairies and New Zealand Dairy Group with the monopoly producer Dairy Board. It will also bring industry deregulation.

A spokeswoman for Mr Sutton said the cabinet was likely to consider three courses of action: putting the merger proposal before the competition watchdog, the Commerce Commission; letting the Government itself decide the industry's structure and regulations - the course urged by the industry; or requesting further consultation between officials and the industry.

There was no guarantee of any decision from Monday's meeting, she said.

But Federated Farmers is confident that the cabinet will approve already-drafted legislation enabling GlobalCo to begin operating from the start of the new dairy season, which begins on June 1.

Dairy Farmers of NZ chairman Charlie Pedersen predicted that ministers would give the go-ahead.

It would then take just a farmer vote to kickstart the company, twice the size of Telecom.

Work on the proposal by the Ministry of Agriculture and Forestry, other Government officials and GlobalCo representatives had been exceptional, he said.

"I think that augurs very well for a positive outcome for the formation of GlobalCo, and I'd be very surprised if the cabinet, given their commitment to the process, didn't agree."

Mr Pedersen said much had been learned from last year's aborted attempt to form a mega co-op.

"I have seen the legislation and because I have absolute confidence in the process and the people involved - the bureaucracy, the GlobalCo representatives and the politicians - I will be very surprised if the process has a setback at the eleventh hour. I do not expect that to happen."

A setback would be referring the merger to the commission or going back to the drawing board, he said.

If the merger was referred to the commission on Monday, a final decision would have to be returned within 60 working days, about July 6.

A GlobalCo spokesman would only reiterate a statement by chairman John Roadley last month that significant progress had been made.

"The industry is hopeful that a shareholder vote can be held in early to mid-May, and that legislation can be advanced as far as possible through the parliamentary process by June 1 in order to provide certainty to the industry's operations in 120 countries around the world," the spokesman said.

But GlobalCo showed its confidence in a package of information sent to farmers last week.

It said the Government was "tentatively inclined" to accept that it was a more appropriate body to determine the structural and regulatory framework of the dairy industry than the commission.

GlobalCo said its merger summary "had been prepared on the assumption that, after full examination, the Government will confirm this tentative view and enact legislation incorporating the general principles described in [the merger documents]."

Mr Pedersen said farmers' reaction to the GlobalCo documents had been overwhelmingly favourable.

Even people who had been adamant that the merger should go before the commission had changed their minds after seeing the information, he said.

"I have not had one negative comment back about the detail."

Mr Pedersen said farmers were now 95 per cent behind GlobalCo.