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To Cooperate or Not Cooperate that is the...

Greetings Readers

NZ Dairy Group is this week discussing what to propose as a means of controlling ‘new milk’ supplies and the marginal cost and benefit of accepting this supply.

Marginal analysis in terms of the successful operation of a cooperative over time is fraught with the potentials of bad decision-making based on incorrect conclusions. Had this current type of analysis been employed by the industry over the past 100 years there would be no cooperative dairy industry and a very little in the way of dairy exports.

The proponents of the old milk – new milk scenario are not only taking from producers the tool that has enabled individual farm businesses to improve their on farm productivity from production increases and scale of operation but are also removing from the industry the importance of total New Zealand milk sales volume. The dairy industry has only recently reached a critical mass that has enabled it to impact and in places dominate the worlds dairy food markets.

The industry leadership should not need to be reminded that the primary reason for the industry structure is to maximise the average payout to all New Zealand dairy farmers. All activities of the industry are focused to that end. The machinations of industry marginal cost and marginal benefit are subsumed by the importance of the best average payout to farmers on an ongoing basis.

Farmers, to provide security to their supply and long term stability to income, form cooperatives. If our leadership gives in to the trendy hoopla of marginal analysis and the momentary benefits of short-term market realisations they will have failed the fundamental needs of their shareholders.

Hope your grass is growing – there are a few calves and lambs appearing – spring is on the way!

The Editor


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