Farmers back mega co-op

By PHILIPPA STEVENSON

Most dairy farmers favour the mega co-op, which also looks the best option for major companies Kiwi and Dairy Group.

A nationwide poll of farmers by Dairy Farmers of New Zealand found 74 per cent ranked a commercially viable mega co-op involving at least 90 per cent of the industry as their preference.

Dairy Farmers chairman Charlie Pedersen said the result indicated that farmers backed industry moves.

"I hope it gives the dairy company leaders some heart that they do have widespread farmer support - not that they have worked all that hard to get it. It comes out of a sense of loyalty [that their ideas have merit]," he said.

The backing was just shy of the 75 per cent farmer vote needed to approve the mega co-op but Mr Pedersen was confident that, if the option was put up, some of those who had other preferences would also vote for it.

Farmers surveyed over the past two weeks were asked to rank eight industry structures in order of preference. They ranged from three different mega co-op options through two vertically integrated companies to open competition.

Thirteen per cent indicated a preference for two competing companies and 9 per cent preferred the status quo. For 77 per cent, the least-favoured option was open competition.

Meanwhile, Dairy Farmers' sixth annual analysis of dairy company financial reports shows that small companies are doing well for themselves and that the big companies would be better off together.

"The ironic thing is that smaller companies like Westland, Tatua, Tasman and Marlborough have very good performances," said Mr Pedersen. "It has got to the stage where smaller companies ... have some options to stay on their own.

"They are small, nimble, can change quickly, are not generally under pressure from neighbouring dairy companies and can find a niche in the world and do very well."

Kiwi and Dairy Group, which take 85 per cent of the country's milk, had recent or projected expenditure to cope with growing milk supply that affected their bottom lines.

"It [the analysis] does show there is room for improvement on return on capital and that is reinforcement for the mega co-op, because it will largely eliminate expenditure that is made too early, resulting in the lag phase," Mr Pedersen said.

"For Kiwi and Dairy Group their best option is together. They don't have the option of being niche. They are big, but not big enough."