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Is GlobalCo Legislation on Course?

Greetings Readers

Following on from yesterdays concerns that the dairy industries use of exchange rate forward purchasing is in the long run a costly useless exercise for the industry today’s news ofGlobalCo’s submission to parliaments primary products select committee give a strong hint of the problems that lie ahead for the new company.

Suppliers will need to be vigilant in their scrutiny of the policies, structures and management that is applied to the new company. It is clear that GlobalCo’s business ethos will be survival above all else, even at the expense of any associated party or market and this includes shareholders.

There seems to be a serious risk, arising from the great expectation for superior performance created by the merger environment that a management philosophy is developing in the GlobalCo structure which will allow a Machiavellian ‘ends justify the means’ approach to be accepted without question.

In some regions new conversion dairy farmers are already seen as the ‘ugly face’ of dairying. The revisionist approach to the proposed industry legislation has been late surfacing and is probably another industry ‘ugly face’ appearing. But worse, it is now being identified as an excuse for poor performance or even failure should a competitor like Parmalat enter the industry in the future.

Suppliers need to be reminded that the industry has entered this consolidation firstly to reduce overhead costs and improve marketing efficiency but the real reason for the merger was to protect the value that the industry had spread through a number of companies and organisations which was under threat from the consequences of deregulation and the removal of the single seller producer board status.

The new legislation under consideration by the parliamentary committee is rapidly growing in inflexibility and magnitude such that it may be more restrictive than the single seller legislation that it is to replace.

Not all of this legislative complexity is as a result of industry demands but it is very late in the process for GlobalCo to object to the 20% rule which appears to be a fundamental proposal of governments approach to competitive access to milk supply. Where were the industry representatives when this element was originally proposed?

The legislation being developed is clearly suffering from trying to satisfy the objectives of different interest groups and is running the risk of satisfying no one..

The creation of rules to implement further rules will not improve production or marketing efficiency of the industry in a way that will maximise payouts to the producer.

Good farming

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