Dairy group fears co-op disaster

By PHILIPPA STEVENSON agricultural editor

The "crown jewel" Dairy Board and the unmatched value it delivers farmers will inevitably be lost to an industry divided up by battling processing companies Kiwi and Dairy Group.

That's the warning from a farmer ginger group on the eve of an expected announcement from the two big cooperatives on merger negotiations which have been as bitter as they have been protracted.

A merger between Kiwi and Dairy Group is key to the mega co-op plan to integrate up to eight processing companies with the Dairy Board.

But the process has been stymied by the inability of the arch rivals to agree on valuations of their companies.

Kiwi chairman John Young and his Dairy Group counterpart Henry Van Der Heyden promised to announce an "agreed position" this week and a call by Dairy Group to its supplier representatives to attend a special meeting tonight indicates some decision has been reached.

A farmer group formed to push for the mega co-op fears the news could be all bad.

Farmers for Control spokeswoman Catherine Bull said an industry which fragmented into two or more companies would be "an absolute, irretrievable disaster for dairy farmers.

"Our costs will increase as we duplicate everything from research and development to marketing. Two or more exporting companies will undercut each other in the marketplace to achieve sales of commodities and we will be fighting and undercutting each other in the more valuable products and markets. Inevitably and very quickly our milk price returns will fall."

Catherine Bull said the industry's "ultimate competitive advantage" was the Dairy Board.

"It is the single export desk, international network and personnel expertise and skill that make the Dairy Board so valuable. This is the jewel in the crown that could be at risk."

If Kiwi and Dairy Group could not agree on valuations of their own companies, valuing the Dairy Board was likely to prove lengthy and very costly, she said.

"The bricks, mortar and brands can be valued easily enough, but the people expertise, skill and network are only valuable as a going concern.

"It is, therefore, highly likely that we will lose many of the people with the skill and expertise to market our product if we try to split the Dairy Board up."

A divided industry would be forced to merge or form alliances with multi-nationals raising the inevitable conflict between the price paid to farmers for milk and the return to shareholders on their investment.

"It is in every dairy farmer's interest to make the mega co-op happen. The alternatives will be a nightmare scenario."