Dumping threat reminder of risks

By Glenys Christian

Over the gate


Anyone who ever wondered why dairy farmers feel the need to control their industry got their answer loud and clear last week.

The dispute over construction of the co-generation plant at the New Zealand Dairy Group's Te Rapa site meant the threat of three million litres of milk a day having to be dumped.

Previously, farmers' chief means of protecting themselves from such a catastrophe was to ensure they owned all of their companies' operations, right down to the tanker fleet. A watertight agreement was signed with dairy workers at the start of the season, and shareholders could be assured that everything possible had been done to enable the processing of all the milk they could produce.

Changing commercial relationships have brought uncertainties. Farmers no longer believe they need to own their industry from top to bottom, in much the same way as the country gradually realised that it could trust someone other than the Government to run post offices.

But they can be excused for feeling very wary about the restructuring path their industry has set out for itself, and whether it does not pay too little attention to the most practical of concerns - getting the milk off the property.

Dairy Farmers of New Zealand's chairman, Charlie Pedersen, has already warned that joint-venture agreements such as that at the Dairy Group mean more risk to uninterrupted milk processing.

Farmers have to weigh up whether they are ready to take that step.

Sheep and beef farmers have had to make the same adjustment in their thinking.

They argued vociferously that, just like milk, their production was perishable.

When cattle and sheep had to leave the farm because of drought, lack of grass growth or a falling meat schedule, farmers believed it was their right to have them killed without delay.

This led them to own every aspect of the meat industry which, as with dairying, was used at full capacity only briefly.

They saw the light when returns fell and smaller, more efficient, plants sprang up.

No longer do they need the grip on the industry they used to feel was so necessary. Changes in ownership structures mean they are now most often minority shareholders with muffled voices.

But their security is in new commercial arrangements companies offer to ensure stock is killed exactly when required.

These contracts have also given meat companies new confidence. Affco, for example, has been able to focus on new opportunities in China rather than fretting about the well-established British and United States markets.

The company is already the biggest tripe brand in China and the plant it is building there under a joint-venture agreement will see products such as this fitting into a well-established niche.

When offal from its New Zealand plants is added, the company looks set to reap the rewards of taking the big-picture view of where its strengths lie.

It remains to be seen whether the dairy industry can do the same.

* Glenys Christian can be contacted on e-mail at glenys@farmindex.co.nz