Boards prevail in battle to sell solo

By Philippa Stevenson

agricultural editor

A push from Government is helping the dairy industry over the first of four hurdles on the way to achieving a mega co-op.

Yesterday, the Government rushed legislation into Parliament to deregulate the $8 billion industry and allow it to form a company which will amalgamate most cooperative processing companies and their marketing arm, the Dairy Board.

It was the third such move in as many days by Food and Fibre Minister John Luxton and Finance Minister Sir William Birch.

On Monday, they announced the kiwifruit industry would retain its single-seller status and corporatise its marketing arm, Zespri.

Yesterday they revealed almost identical plans for the apple and pear sector's marketing agent, Enza.

The dairy industry legislation paving the way for the integrated company was "epoch-making," they said.

"That enterprise, known as the MegaCo-op in industry circles, would be New Zealand's biggest commercial company by a significant margin.

"That would provide the critical mass necessary for successful global operations, but on a commercial, rather than a regulated, basis."

However, the bill would not proceed without Commerce Commission authorisation for the mega co-op, and a 75 per cent vote of support by dairy farmers. Formation of a mega co-op also hinges on an agreement to merge by the two major dairy companies, Kiwi and New Zealand Dairy Group. That could yet be the stumbling block.

Dairy industry leaders, who agreed to the draft bill only late on Tuesday, welcomed its completion as paving the way for industry reform.

Labour agriculture spokesman Jim Sutton condemned the secrecy surrounding the talks and warned that the reforms risked developing a speed wobble.

"As we see it, farmers have tentatively endorsed the vision, and given their leaders a mandate to further develop their plans, but we are still some way from the point of being able to say that the industry leadership has obtained informed consent of the stakeholders to introduce legislation which will represent the most radical change in the industry since the formation of the Dairy Board."

Dairy Board chairman John Storey said the bill was the culmination of much work and "if there is reason for haste, it's probably the issue that every day of delay [costs] $1 million."

The board has said that a complete reconfiguration of the industry would boost gross earnings from $8 billion to $40 billion a year.

Under the legislation, planned to take effect from September 1 next year, exporters would be free to market dairy products except in the quota or similarly restricted markets of the United States, European Union, Japan and Canada.

Around 84 per cent of the industry's sales revenue is earned outside the quota markets.

The ministers said dairy quota, owned by the Government and presently assigned to the Dairy Board, would be exclusively held by the mega co-op for six-and-a-half years, and then phased out over the ensuing four years.

Farmers would exchange their company shares for shares in the mega co-op which would own 100 per cent of the the Dairy Board, reconstituted as a commercial company.

Farmers exiting the industry should be able to recover fair value for their mega co-op shares and the industry has proposed there be a commodity milk price, a "Q" class of shares covering returns on quota, and an "A" class covering all other returns.

Mr Storey said farmers would get to vote on the mega co-op proposal by the end of October at the earliest.