Farmers wary despite acceptance of dairy mega co-op

By Glenys Christian

Over the gate

A small group of Waikato dairy farmers can feel justified in saying: "I told you so.


They are the people who started talking about the idea of a single, national dairy company around two years ago.

The idea was picked up by farmers in other areas, commented on by academics and given highly placed moral support, but it was certainly not welcomed by some industry leaders.

Dairy company chairmen said the structure proposed was unworkable and the Commerce Commission would object to the lack of competition. They maintained that there could not be efficiency gains without it.

The then chairman of the New Zealand Dairy Group, John Storey, rejected an enhancement of the original proposal for the merging of all companies and the Dairy Board, saying that there would be transparency and accountability difficulties.

Now he is board chairman and last Wednesday he was the one to unveil its proposed mega-cooperative structure, promising that it could deliver $300 million a year of extra earnings.

The farmers who first came up with the single-company idea say the proposal is similar to what they were on about all along. They say the delay was caused by a combination of personalities and politics.

In Wellington, board directors saw how well the collective structure worked. But once they got back home and resumed their company director roles they felt obliged to take a parochial view.

The great majority of farmers saw immediately that the loss of earnings through reduced transparency paled into insignificance alongside the power of a combined industry at every level.

Supporters of a single company structure still have some areas of concern.

The first is governance - farmers must own the new structure and it must work.

The second is the nature of the new-look dairy industry itself. There are strong reservations about any move too far from cooperative to corporate.

And the third is over the proposed vertical alignment of the manufacturing and marketing arms of the industry.

There is no problem, they say, with the consumer business portion of the dairy industry being investment-driven. But that investment must be to the benefit of today's farmers as well as tomorrow's.

Those who touted the idea of the single company have won the day.

But they know their grassroots vigilance is still very much required to make certain that the dairy industry doesn't become just another piece of family silver to be sold overseas for short-term and short-sighted financial gain.

* Glenys Christian can be contacted on e-mail at glenysfarm@xtra.co.nz