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GlobalCo

Greetings Readers

The adage beware of free advice from city folk in pinstripe suits has often proved sound advice for farmers. Tony Baldwin, a man with undoubted experience seems to have been lately an almost lone voice in putting forward opposing analysis of the GlobalCo merger.

The nub of his argument is centered on the ambitious plans for the GlobaCo’s expansion by acquisition, of a significant position in the worlds food markets. This, with the apparent sole objective of reaching an annual turnover of $30-40 billion in the next nine years.

His reported address in Taranaki last week was focused on the risk and responsibility for such an investment and the remoteness and lack of influence shareholders may have on the operations of this structure, inviting the need for the setting of a bench mark standard for performance measurement.

It is not only the shareholders investment that should be under scrutiny, but the presumed $15 billion debt that must be taken on in bank borrowings to fund the acquisitions and market development demanded by the scale of the plan.

The red herring of whether farmer should or would want to invest overseas through the dairy coop shares is a moot point if the performance results are positive in the minds of the shareholders.

However, where the problem arises, are when under conditions of adversity and the marketing return is towards zero, farmer/shareholders may need to to survive on commodity milk prices alone.

There are many examples of exporting companies that with the best staffing, plans and opportunities still miss their objective over many years. AFFCO is an excellent example.

It could be likened to betting on a horse race where GlobalCo has undertaken to bet on a winner in ten out of ten years. Possible - perhaps, desirable – definitely, likely – probably not.

In earlier adverse times of dairy cooperative development stories are told of suppliers deferring the presentation of their monthly dairy cheques to ensure that the coop survived.

This today is an unlikely response because the nature of the giant cooperative is vastly different and farmer’s resources relative to the coop are also much smaller.

It is that difference that Mr Baldwin may be identifying and that the risks now being entered into on behalf of the shareholders are well outside the operating standards of the cooperative industry in recent times.

It will be a disaster if because of risky market activities undertaken by directors and executives on behalf of shareholders leads to the “there is no other way scenario”. The loss of the cooperative’s ownership due to the inability of supplying shareholders to fund the risk in adversity. Not a desirable thought.

Unfortunately early indications are that GlobalCo is a company founded on the “we know best” philosophy. As shareholders kept in the dark you may only be aware of a problem well after the event. Your directors and staff serve two masters – the company’s market and the company’s shareholder/suppliers.

Can GlobalCo hasten slowly in the interest of both?

Good farming




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