Tatua sets another payout record

By PHILIPPA STEVENSON agricultural editor

Record-setting Tatua Dairy Company has eclipsed past feats to set a new benchmark in farmer payouts.

The single-factory Waikato company will pay its 136 shareholders $5.50 a kg of milksolids, providing a margin from company activities of 90c above the Dairy Board base price.

Suppliers will share around $48.9 million based on the company's production for the 2000-2001 season of 8.9 million kg of milksolids. To that the company is adding imputation tax credits of 2.26c per kg of milksolids, or around a further $200,000, for a total payout of $5.52.

The industry's largest companies, New Zealand Dairy Group and Kiwi Dairies, who are about to form the Global Dairy Co, will pay $5 to their approximately 14,000 suppliers.

Tatua chairman Dr Alan Frampton said the record result reflected the decisions made over a long time, including investments in staff, new technologies and high-tech products.

"It's perhaps coincidental that it is occurring at the same time as the major restructuring of the dairy industry," he said.

It was company policy to improve the margin over its competition year on year, as well as put money to reserves - this year more than $600,000.

It could not ensure the gap over its rivals would continue to grow "but we certainly expect to maintain [the present margin] and possibly improve it year-by-year," Dr Frampton said.

The company's revenue reflected an excellent production year for farmers, rising to $94 million from last year's $75 million.

Tatua spent $8 million on new plant in the year, continuing a capital investment programme which has averaged $4 million a year for the past seven years.

Yesterday, the company made a submission on the sector deregulating legislation, the Dairy Industry Restructuring Bill, to the primary production select committee.

Dr Frampton said Tatua generally supported proposals allowing the formation of GlobalCo but wanted protection as it came out from the Dairy Board's marketing umbrella.

"There are a whole lot of transitional matters [and] detailed negotiations that will have to take place which are not specifically covered by the legislation."

The key matter was Dairy Board valuation and how Tatua would extract its around 1 per cent share.

Meanwhile, in its submission to the select committee, local dairy products marketer New Zealand Dairy Foods said a simple change was needed in the legislation to avoid New Zealand consumers being left with an uncompetitive domestic market.

The company said the bill's reference to contestable New Zealand markets for dairy goods and services, rather than competitive markets, was of major concern.

A contestable market was one where there was the theoretical possibility of new entry or expansion by existing competitors, but it essentially described a market in which there was a single, enduring market-dominant firm, the company said.

Contestability was not the standard applied to any other sector of the economy. The Commerce Act standard of workable or effective competition would meet the objective of Agriculture Minister Jim Sutton, who had described the Government's goal for the industry as vigorous and genuine competition, Dairy Foods said.