Sutton knocks wool future report

By PHILIPPA STEVENSON

Agriculture Minister Jim Sutton believes woolgrowers were shortchanged by the $3 million McKinsey report, which recommended radical changes to their industry.

"I don't think the McKinsey report is an adequate basis for determining the future," he told the Business Herald.

"It just begs an awful lot of other questions."

Growers' overwhelming support for the report's recommendations, which included abolition of the Wool Board, was more a vote in favour of any change, he said.

'I think there is quite a sentiment that things can't be any worse than they are."

Mr Sutton said the McKinsey consultants had done no favours for growers by spreading the idea that a 1 per cent levy on wool sold, rather than the present 5 per cent levy, would pay for all necessary research and development.

"That is hopelessly underdoing it, and unless farmers commit themselves to adequate market and product development programmes, wool is going to become less and less relevant."

Mr Sutton said the key to success for any plans in the industry would be grower buy-in.

Merino NZ, which had already gained farmer commitment, was "doing a pretty good job" and would survive whatever the rest of the industry did.

But the same concept of vertical integration from farm to market in the strong wool sector would be more difficult to achieve because most producers had a bigger stake in sheepmeat than wool.

In a wide-ranging review of his portfolio, Mr Sutton said he was also unenthusiastic about retiring Meat Board chairman John Acland's proposal for a super-board to cover wool and all types of meat.

It was a good time to consider what structure was in farmers' best interests but "if you have an industry board that covers venison, beef, sheepmeats and wool, you are expecting farmers to attend consultation-type meetings in which a large part is unrelated to them."

The dairy industry is also contemplating change to its producer board, by integrating the Dairy Board with manufacturing co-operatives.

Mr Sutton said he believed the industry was well down the track to designing a corporate structure to meet the needs of its growth strategy.

"Understandably, they do not want everybody looking over their shoulder why they cut the deals."

If no further news came from the industry before the end of the year he would feel "moderately impatient," but he was confident industry leaders understood how urgently change was required.

The Government's conditions for introducing legislation to deregulate the industry remained the same.

The industry had to demonstrate it had the support of most dairy farmers, show the structure was fair to minority groups which did not want to be part of a monolithic structure, and establish that it was in the public interest.

Mr Sutton said he would contemplate legislation allowing a staged process so the industry could settle into the new structure without competition or an exodus of suppliers.

Wearing his Trade Negotiations Minister's hat, Mr Sutton said the just-completed trade pact with Singapore had given New Zealand a huge amount of credibility in Asia.

"It demonstrates that we are prepared to engage in relations - that we can and will," he said.

A "significant" list of Asian economies was now contemplating trade relations with New Zealand.

While a broad World Trade Organisation round was the Government's first choice, more bilateral trade deals within North Asia would "future-proof" New Zealand, he said.

"The prospect of a North Asian union [excluding New Zealand] is very real and very scary.

"We suffered from Britain joining the European Union. It is absolutely vital for us that we get a foot in the door of North Asia."