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Cooperatives Out of Fashion?

Greetings Readers

The smart MBA educated boys in dark suits are continuing there campaign against the principles of cooperation as in a producers cooperative run for the benefit of farmers.

Critic Tony Baldwin’s suggestion that Fonterra’s focus on the customer has come 76 years too late begs the question, who has been buying the billions of dollars New Zealand milk products exported over that time? If they weren’t customers who were they?

These industry critics wish to use the success measurements of corporations – increased sales equals increased margins to cover increased overheads and profits equals increased returns on investment capital.

The importance of cooperation lies in all the residual benefit of the cooperative going to the producer of the raw material, which continues to be the case in spite of attempts to “unbundle” the relationship between Fonterra’s milk payments and capital return.

Critics see the producers wish for “control” as some aberration that will end in disaster for producers. But the model of the Richmond Meat ownership and control fiasco has all the elements of down stream customers wishing to exercise their “reverse control” over the flow of products into their ownership. Where lays the difference?

Further more the straw man of political intervention bailing out Fonterra is an image of the past. A past that had the dairy industry closely tied to the fortunes and development of a young country. But Mr Baldwin conveniently overlooks dairy’s devastating decades, prior to government’s 1930’s intervention, at the hands of the Tooley Street traders.

Fonterra suppliers should beware of modern day Greeks bearing the gifts of financial enlightenment.

Good Farming

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