Farmers fret as time slips by on co-op deal

By Glenys Christian

The New Zealand dairy industry still has a cooperative structure at heart, but there seems precious little cooperation going on close to the surface at present.

Farmers are increasingly worried about the lack of progress in stitching together the proposed mega co-op, put to them longer ago than they care to remember.

They are all too aware that time is slipping by. Thanks to the National Government the enabling legislation is all in place, but whether the industry has the willingness and the means to put the new structure to bed is still very much in question.

At the root of the problem are old rivalries.

Dairy companies, be they large or small, always knew they had to pick their time to merge.

A good time always followed a bumper production season, when the company accounts were in their best shape and farmers were happy that they could gain best advantage from their potential partner - in other words their former competition.

It is no different this time.

Kiwi Cooperative Dairies has the weaker balance sheet thanks to merger moves in both the North and South Islands and wants to talk up its value as far as possible.

New Zealand Dairy Group, as the dominant player in the industry, is used to getting its own way. It has a strong financial position, as shareholders have repeatedly been told whenever they complain about lower payouts.

Northland Dairy Company, which failed to join Dairy Group two years ago after the two companies sniffed suspiciously at each other for some time, is now ready to join Kiwi.

Whether the mega co-op goes ahead or not, this alliance will leave its 1500 suppliers in a much stronger position.

Dairy Group says size does not matter, but the other companies well know the dangers of being small and isolated.

Farmers want their industry to retain its collective power but they also want the best deal for their own company.

Stuart Gower, from Otorohanga, says it is "so disappointing to me as a long-term supporter of one company to have it come to this."

He understands why Kiwi is "taking it to the wire" but says both it and Dairy Group must give financial information on the mega co-op that will assure farmers of a watertight position going into the merger.

"We've reached the stage where we need action," he says.

There is confidence off-farm that a recommendation to merge will be put to Dairy Group and Kiwi suppliers in the next two weeks - and that farmers will find it acceptable.

With the flush of the season only just behind them, however, those two weeks will seem among the longest in their time on the land.

If the mega co-op proposal falls over now, they know the status quo will mean lower returns and an uncertain if not downright less profitable future. The second-choice strategy would be a head-on battle between Dairy Group and a strengthened Kiwi in overseas markets.

That would deliver the competition desired by some, mainly the international players watching New Zealand dairying's every move.

The industry needs to cooperate as it never has before to get the deal done.

* Glenys Christian can be contacted on email at glenys@farmindex.co.nz