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Dairy Cooperative OK

Greetings Readers

There may have been a collective (cooperative?) sigh of relief through the nations cowsheds last night.

The government has approved the dairy regulatory package and the business with a few conditions will be passed back into the hands of the farmer shareholders - where one hopes it will remain.

A few commentators are betting both ways on this package with their concerns about the bad factors of monopoly supply of milk and milk products to the NZ market and the risk that farmers are exposed to with and without such a giant coop.

It seems that local market equalization price structures that have been in place for the past 65 years are not seen as monopolistic - they are - and they have worked to the benefit of both consumer and producers for the past sixty years..

Guaranteed prices and compulsory purchase by the Dairy Products Marketing Authority are the origins of the mega coop that suppliers will commence supplying next season

This Labour Government should have the thanks of today's dairy farmer for providing the legislation to consolidate and perhaps in the future deconstruct a very large industry on a more equitable basis than likely under a competitive model.

Today's industry should also thank the first Labour Government of 1935 for the complex farmer political beast it created out of a desperate period of payouts of 4d per pound butterfat. It is on the back of that early legislation and a good deal of effort and technology that the platform was built for the NZ dairy farmer's relative prosperity today.

Payouts based on average cost of manufacture were the invisible stick that has driven the consolidation of the industry and efficiency improvements. We have now very nearly reached the end of that cycle. Two or three years and it will become a little clearer if 'bigger is better' and efficiencies improve. If not it will be into the start of a whole new cycle.

The proposed legislation has some interesting new and creative options included for shareholding and supply. How these are utilised and built on is an excitement in store. It could be by design perhaps; even accident, that there is enough 'stick' included in the proposed regulation to keep the giant coop's executive and directors honest and pushing hard

Lets hope the industry proves the critics wrong and the unsaid reasons for farmers continuing in a cooperative right

Good farming




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