Working Together or Failing ApartMonday, Jul 10, 2000
The media is particularly excited about the upturn in the fortunes of New Zealand farmers this season.
They seem to be unable to understand that for a high proportion of farmers, the previous two seasons
were loss making and any upturn has barely covered those losses. Farmers' first priorities will
be to reduce debt, then attend to deferred maintenance, and then finally apply a small residual
to improving personal living. Not expenditures that will be significant in lifting the economy.
The first reactions to the McKinsey Wool Report identify the problems with defining and building long-term
structures using funds taken from current producers. This inter-generational conflict also
underlies the failed Mega Merger of the dairy industry.
The wish to secure a paper capital benefit or capital distribution now overlooks the fact that the primary
reason farmers need these structures is to give secure and profitable, processing,, marketing
and distribution in competitive markets. Profit from product sales at the farm gate is the first
priority of any farm business. Profit is tangible, quantifiable and drives the management of our
individual businesses. It is the reason we form cooperatives and act collectively.
The demutualisation of AMP and the subsequent business disaster for that company is a warning that smart
business practice promoted by the most qualified of consultants can still be much worse than
following the twelve principles of cooperatives or mutually owned companies. Who amongst us would
have felt more comfortable with a better returning insurance policy - our reason for being with AMP
- against holding scraps of share paper that rise and fall in value? What was the original benefit
we sought when we joined AMP- growing insurance security or exposure to capital fluctuation unrelated
to the service we purchased?
As farmers we need to look carefully at the motivation for change in our relationships as producers
to the distributors and retailers in the markets we serve. Profit at the farm gate must remain our
objective otherwise we are little better than traders in slips of paper on a futures market.
I hope your grass is growing and your stock are improving ready for lambing or calving.