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Working Together or Failing Apart

Greetings Readers

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.

The Editor


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