Between the lines: Farmers will ask same old question

At a New Zealand Dairy Group annual meeting a few years ago, an old-timer listened to the latest reasons the country's largest dairy company had not delivered the highest payout to suppliers.

He got to his feet to ask why the payout had been short of the top mark for as long as he could remember, despite the company's ever-growing size and repeated claims by directors and executives that this or that acquisition, this or that bigger factory would deliver the goods - next time.

He would be asking again this year.

Only Tasman Milk Products, with 212 suppliers, will pay its shareholders less than Dairy Group, which has 7800.

The giant is level-pegging with tiny Kaikoura, was pipped by small Westland and Marlborough, put in the shade by large Kiwi and gazumped by teeny Tatua.

Companies argue that payout comparison is not a valid indicator of performance, particularly when they may be in an investment phase. And Dairy Group's North Island farmers, for instance, now get a return from their half-share of domestic retailer Dairy Foods, which used to be in their payout.

But dairy companies tend to reach for that rationale only when they suffer from the comparison - much like politicians who quote favourable opinion polls but find negative ones unreliable.

And dairy farmers remain attached to the ready reckoner.

So Dairy Group suppliers, who are getting paid less than their Kiwi counterparts, are now bound to be questioning the soundness of the information given to them at the time of the collapse of the merger talks between the two companies.

They were told, after all, that one of the reasons no agreement could be reached was that Kiwi refused to agree their company was worth more.

While they argue, Tatua - the consistently top-paying company that 20 years ago decided that high-tech and niche markets were the smarter way to higher profits than more and more acres of gleaming stainless-steel producing commodities - continues to widen the payout gap.

Farmers, however, have an ever-lengthening list of things to worry about in an industry which looks increasingly dysfunctional.

Dairy Farmers of NZ chairman Charlie Pedersen laments the premature leaking of the resignation of the popular Dairy Board chief executive Warren Larsen because of fears it will jeopardise industry strategy, including overseas joint ventures.

Also on the list of woes are:

* The total lack of progress from the talks between Kiwi and Dairy Group.

* The exclusion of board executives with their marketing nous from the discussions.

* The non-delivery of the McKinsey report on industry structure, promised to be in farmers' hands in June.

Expect plenty of old-timers on their feet at the upcoming round of company annual meetings asking why the country's biggest industry is not performing at its best.