Dairy News Today August 2005

The story behind J.Swap

August 2005, Issue 153

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How politics forced the

Anchor sale

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Sudesh Kissun

FONTERRA has paid a high premi-um to reclaim the No.1 spot in the New Zealand milk market.

Four years ago, Fonterra sold off Anchor Milk to Graham Hart for

$310 million, only to buy it back last week for $754m.

For Fonterra, 2005 has been a roller-coaster ride as far as acquisi-tions are concerned.

The failure to grab National Foods Ltd and the unsuccessful bid

with Pyne Gould Guinness for Wil-liams and Kettle rural stores has left scars.

To rub salt into the wound, PGG has announced a merger plan with Wrightson, which swallowed the W&K chain last year.

However, Fonterras deal with NZDF will be a mini-victory as rivals San Miguel Corporation and Nestle had also shown interest in the busi-ness.

Christchurch stockbroker Grant Williamson, Hamilton Hindin

Greene, agrees that Fonterra has paid a good premium to get the Anchor brand back but points out that Fonterra had no choice but to make the move.

It is a one-time opportunity for

3Dairying TodayAugust, 2005

News Opinion Management Energy Machinery & Products

Tractors Animal Health

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Agribusiness Calving

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Politics forced Anchor saleSudesh Kissun

A FORMER New Zea-land Dairy Group direc-tor believes Fonterra was under increasing pressure to bring the Anchor Milk brand back into its fold.

Keith Holmes says the Anchor brand had always been more valuable than the Meadow Fresh.

Holmes says Fonter-ras decision to pay $750 million for New Zealand Dairy Foods Anchor Milk and yoghurt business is a smart move provided its a win-win situation and the price is right.

Holmes admitted that he has agonised over the decision made during the merger process to retain Kiwi Dairies Meadow Fresh brand and offl oad NZDGs Anchor to Gra-ham Harts Rank Group, owner of NZDF.

We really had no choice, he says.

The merger process was fraught with diffi cul-ties of personality clash,

politics and personal agen-das, he says.

NZDG was worth more than Kiwi but they were adamant that the merger was on equal terms.

Holmes says the deal to sell Anchor was a face-saving measure.

It was easy to ring NZDF and offer Anchor, he says.

We were the more valu-able brand but it was all about doing what was more achievable rather than what was commercially sound.

Looking at the value of Anchor Milk, I think Fonterra was under increas-ing pressure to bring back the Anchor brand sooner rather than later.

Holmes describes Hart as a smart cookie, who got the best out of the situation surrounding the merger.

He knew we were up against the wall and knew he was going to make mon-ey.

Holmes says he wont be surprised if Hart rebuilds

the Meadow Fresh brand and sells it off within the next few years.

Holmes supports Fonter-ras push to align the An-chor brand both locally and worldwide and the buying it back is sensible in terms of retaining and promoting brands.

He says branding is very important and Fonterra re-tains the No 1 spot on the domestic market with An-chor Milk.

Under a business swap announced last week, Fonterra will also buy the FreshnFruity yoghurt brand.

In return Fonterra will offl oad its Meadow Fresh brand beverages and yo-ghurts and Kiwi Meats businesses to NZDF for $ 416m.

Fonterra chief execu-tive Andrew Ferrier says the deal will return the iconic Anchor brand to its product range in New Zealand, thereby align-ing its international brand portfolio.

Anchor is one of our international power brands and this is a once only op-portunity to regain the brand in our home market, says Ferrier.

NZDF says it recognised the logic of Fonterras strat-egy in wanting to align its domestic brands with its international profi le.

It says while they were acquiring a business with a lower profi t base, it con-sidered the Meadow Fresh and Kiwi Meats businesses to be well-run operations and well-positioned in the New Zealand market.NZDF will retain its cheese business and will continue to use the Anchor brand under a 10-year licence.

It also retains Puhoi Cheese. Fonterra will re-tain its Mainland cheese and export businesses.Under the deal, 1500 Fonterra employees and 800 NZDF will swap em-ployers.

The two parties have agreed to settle on August 31. Keith Holmes

Fonterra pays premium for top spot

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4 Dairying Today August, 2005NEWS

From page 3

Bonlac restructure on cards

Nats go to the dogs

Premium paidFonterra to grab the No 1 spot in the local market and they had to pay a good premium for that, he says.

Williamson says that the sale proves that Graham Hart is a smart operator with anything he buys.

NZDF has comes out of this extremely well from a profi t point of view, he says.

Williamson says Fonterra made a tidy profi t by selling its National Foods shares and may have used it to fund the NZDF deal.

Fonterra is moving with their strategic plan of making acquisi-tions in important markets to remain competitive, he says.

Fonterra Brands managing director Sanjay Khosla says the NZDF acquisition

Alan Harman

BONLAC Supply Co. shareholders voted 94% in favour of Fonterra Cooperative Groups offer to re-structure Bonlac Foods Ltd. which, as a result, will become a wholly owned subsidiary of Fonterra.

Fonterra chairman, Henry van der Heyden says that through full ownership of BFL, Fonterra will be in a position to invest in growth of the companys milk supply, im-prove its balance sheet and create greater manufacturing scale and effi ciencies.

Full ownership of BFL is en-tirely consistent with our key objec-tives in Australia and now it is up to Fonterra to go ahead with plans to build more effi cient production, a stronger domestic branded busi-ness and contribute further to a globally competitive sector.

BSC chairman Noel Campbell says the vote refl ected that Fonter-ra had put a strong and fair offer on the table and that both companies were eager to work together in the future.

BSC shareholders have rec-

ognised that Fonterras offer will provide them with greater security and better returns and help to achieve growth and investment that BFL could not achieve if its current structure were to remain in place, he says.

The result ushers in a new era for BSC farmers that will be defi ned by stronger returns and an opportunity to be part of a growing business that Fonterra will be investing in. The posi-tive response by farmers also indicates that BSC farmers want to be at the forefront of a dy-namic and growing Australian dairy sector.

Fonterra chief executive An-drew Ferrier says the immediate priority would be a move to op-timise capacity at BFLs plants as well as growing milk supply. He also reiterated that the fur-ther strengthening of Fonterras position in Australia remained a key focus.

This is a successful and sig-nifi cant step for us in Australia but we still believe there is further consolidation to come in the indus-

try here. We see this as a key local market for Fonterra and we will be

part of any further industry chang-es, he says.

Well also be looking at how we can further strengthen BFLs balance sheet, reduce the costs of servicing debt, and where we can apply new investment to grow the business.

Staff will see very little impact on their day-to-day operations as

they will continue to work for BFL and have the same terms and conditions and the same contracts. The transition for farmer suppliers should also be seamless allowing them to con-tinue to run their businesses as usual but, with the added secu-rity and stability of Fonterras backing.

Campbell says suppliers will be asked to vote on proposed changes to the structure of the BSC board at the agm later in the year.

The BSC board will now be expanded and continue to manage farmer shareholding interests in line with share pol-icies and also to begin to act in an advisory capacity to Bonlac Foods, Campbell says.

The agreement we have reached with Fonterra requires the agree-ment of both parties on certain is-sues such as milk price, incentives and quality standards and the BSC Board will play an important advi-sory role to BFL in the future.

Andrew Ferrier

Benedict Collins

THE anti-farmer Labour Government will have cockies thrown in jail or fi ne them $25,000 if they fail to clean their dogs bowls dailyor so National would have you believe.

As the September 17 election draws near the main par-ties are injecting a bit more mongrel into their campaigns as they attempt to cajole voters into siding with them.

Last week National MPs Nick Smith and David Carter claimed Agriculture Minister Jim Sutton had introduced new regulations that would force farmers to clean food scraps from their dogs kennels daily.

Worse still, Sutton had it enshrined in law that dogs bowls not only had to be cleaned daily but also dried with a disposable paper towel.

Sutton had endorsed these measures in a new animal welfare code of practice, they said, and had made it clear that failure to comply could result in legal action.

These stupid requirements show there is no limit to Labours nanny state policies, it is red tape gone mad and nothing more than politically correct rubbish the MPs said in a fl urry of press releases.

is about achieving a much stronger align-ment of brands.

Its also consistent with our strategy to be the number one or two player in all the categories in which we compete in our home market while align-ing the global brand portfolio and providing further opportunities for offshore growth, he says.

Buying FreshnFruity yoghurt business from NZDF will boost Fonterras yoghurt range.

Yoghurt, and cul-tured dairy products, are one of the fastest growing dairy catego-ries worldwide, says Khosla.

The FreshnFruity brand mix has poten-tial to be applied in markets outside New Zealand.

It is no wonder kennel clubs and Federated Farmers are up in arms, Smith told the nation.

Unfortunately, Smith and Carter neglected to mention one awkward little detail -- the truth.

In fact, just one phone call to Federated Farmers re-veals that not only is the organisation not up in arms about the code but is actually a willing participant in helping draft the new dog code which is in its very early stages.

A spokesman for the federation says it is being drafted by about a dozen organisations and is still six months away from going before the National Animal Welfare Ad-visory Committee (NAWAC).

After NAWAC sees the draft, it is subject to public sub-missions then goes back to NAWAC before fi nally going to Sutton for signing off.

Further, the spokesman says, the requirements to clean bowls daily would be best practice advice and not mini-mum standard requirements.

It appears National has been barking up the wrong tree.

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5Dairying TodayAugust, 2005 NEWS

US relations expendable?Benedict Collins

WHILE Labour enjoys renewed success at the polls following its accusations that Nationals policies are being formulated in Washington, not Wellington, there is evidence these tactics are ruining trade prospects with the United States.

Dairying Todays stablemate Rural News revealed recently that leading agricultural trade advo-cates are dismayed that Labour is poisoning trade relations with America in its attempt to be re-elected. One agricultural industry leader who travelled to Washing-ton recently for trade talks says senior American politicians are extremely upset that Labour is us-ing them as a political football.

They [the American politi-cians] told me privately that they are really disappointed and said they wouldnt do anything that

would help Labour get back into power, the source says.

All these heat-of-the-moment political comments that are being made here will be remembered there [Washington] for a long time to come -- reports and all the newspaper clippings are be-ing sent back there.

There is no question about it, the Government is doing long-term damage to our relation-ship.

With each Labour attack on Nationals alleged inappropriate relationship with the US, the in-dustry leader says, the odds of New Zealand acquiring a FTA with America lengthen.

The senators told me there are three main issues for them surrounding an FTA with New Zealand: the nuclear-free policy, our dairy industry and pharma-ceuticals.

Another apolitical but senior

trade source confi rmed that La-bours tactics in the domestic political arena are detrimental to efforts to expand trade with the United States -- theres abso-lutely no doubt.

There is growing disillusion-ment within New Zealand trade circles at the attacks on National/United States, they say.

However, a spokeswoman for Minister of Foreign Affairs and Trade Jim Sutton claims he is not aware of any fallout over the at-tacks which she says are quite clearly not aimed at America.

This is not about them [Amer-ica] but its about certain National MPs behaviour and whether that behaviour is appropriate.

The spokeswoman says there is nothing wrong with having a relationship with America and Sutton has a good working re-lationship with his United States counterparts.

Fear of attacks in Saudi Arabia sparked a price rise to $US64 per barrel.

Oil price soars while kiwi climbsAS fears of terrorist attacks in Saudi Arabia grew and Iran renewed its nuclear work last week the price of oil rocketed to US$64 per barrel.

Saudi Arabia is the worlds largest oil exporter, producing 10 million barrels a day, and Britain warned of imminent terrorist attacks there.

As foreign governments shut their embassies in the kingdom, Iran announced it was spurning international advice and resuming uranium production at one of its nuclear facilities.

Iran is OPECs second largest oil producing nation and the twin fears of disruption to oil supplies combined to push oil up by nearly US$2 per barrel to US$64.

In todays money the price of oil during the 1970s oil crisis would have been US$80 per barrel.

Prices at the pump in New Zealand last week were diesel 93.9c/litre and U91 - 139.9/litre.

BP New Zealand says that during 2004 the average price of oil rose 33% and that this trend has continued strongly into 2005.

Despite Finance Minister Michael Cullens calculations that petrol prices had peaked when he imposed his 5% fuel tax on consumers in April, the New York Times is quoting analysts saying the price of oil is, without doubt, going to continue rising.

Meanwhile, the kiwi has reversed some of its recent downward trend rising nearly two cents during August to be at US69.3c going to press.

The rise comes despite the United States Federal Reserve lifting interest rates there again last week and shows the American economy is more affected

than New Zealand by the high price of oil and Middle Eastern unrest.

While the kiwi has begun to rise agricultural commodity prices fell for the second consecutive month in July.

The ANZ World Commodity Price Index fell 0.5% in July extending a 0.6% decline in June which provides further evidence that a peak in prices was reached in the second quarter of 2005.

The correlation between the kiwi and world commodity prices was also mentioned.

On the way up, rising world commodity prices have been dampened by a strengthening New Zealand dollar, now in the early stages of a correction; a weaker New Zealand dollar has provided an offset to weaker world prices, the ANZ says.

Benedict Collins

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STAND-alone dairy company Westland Milk Products is re-viewing whether its share value of $1.50/kg of milksolids -- which has remained unchanged for years -- is suffi cient for future company growth.

Consultant Rabobank is review-ing the companys share structure and is expected to make recom-mendations to the board, which will put its preferred option to the companys agm in late Octo-ber, says Westland chairman Ross Scarlett.

But it will be the shareholders who will make the decision about the capital structure of their com-pany.

Westlands board was neutral, he says. The companys strategic plan did not indicate a funding short-age for future processing growth at the $1.50/kg share value, but the Rabobank review would determine that, he says.

Westlands share value of $1.50 has been unchanged since before West Coast farmers opted out of the Fonterra mega-merger to retain their own independent coopera-tive.

In contrast, Fonterras fair value share has lifted annually on inde-pendent advice since the company formed in 2001 and for the 2005-06 season has been boosted 75c to $5.44.

If Westlands payout is close or better than Fonterras, then the $1.50 share value makes Westland an extremely attractive place to come farming, Scarlett says.

Westland paid its suppliers $4.53/kg MS for the 2004-05 sea-son, just short of Fonterras $4.59/kg.

Dairy Farmers of New Zealand West Coast chairwoman Katie Milne says a review of Westlands share value was timely. Weve gone through that fi rst phase of go-ing alone. It could be that $1.50/kg is an appropriate level, but unless

we look at it we wont know. Dairying on the West Coast con-

tinues to move ahead, with an extra 10,000 cows supplying the compa-ny milk last season and 8000 more cows this season.

Westland general manager op-erations Hugh Little says over the last 10 years the companys milk supply has increased an average 9-10% each year. This coming season it is budgeting on a further 13% lift.

However, this could be exceed-ed as farmers recover from a dif-fi cult, wet season in 2004-05 when

production was unchanged on the previous year.

Increased milk volumes will come from fi ve new conversion farms as well as production lifts on existing properties. Its 336 suppliers owning 386 farms, with Landcorp among the multiple farm owners. Westland continues to in-vest in new processing at its Hoki-tika plant, last season spending $9 million on an anhydrous milkfat plant and $38m in casein and whey products manufacture. This year it will invest $34m in caseinate man-ufacturing.


Westland reviews futureHigh rate burden remainsDON Nicolson, vice-president of Federated Farm-ers, says members are disappointed at a select committee report into last years local government elections.

The committee has ruled out a return to fairer representation for groups such as farmers sad-dled with a disproportionately high rates burden, Nicolson says.

He was commenting on the Justice and Electoral Committees report Inquiry into the 2004 Local Authority Elections.

The committee chose not to recommend rein-stating pre-2001 criteria for fair representation that took account of population and other factors such as rateable value and land area. Instead the committee endorsed using only population for set-ting local authority representation.

In some rural areas, farmers are paying the lions share of the total rates bill but make up only a small proportion of the population, which means they struggle to be heard round the council table.

The new arrangements discriminate against people in rural areas, particularly farmers who pay high rates due to the archaic property-value-based way that local government is funded, said Nicol-son.

Farmers arent asking for councils to be domi-nated by farming interests. But they seek fair rep-resentation whereby those who fund most council spending should have a fair say around the council table, Nicolson says.

Twenty-eight of 86 councils reviewed their rep-resentation arrangements before the 2004 elec-tions, while the remaining 58 must do so before 2007. They will be forced to use only population quotas, further reducing the number of rural coun-cillors.

Rabobank is reviewing the co-ops share structure.

of their fi nished product.The Whitestone factory

is fi ve kilometres from the nearest Fonterra dairy farm.

Evansdale Cheese will end up paying Fonterra 31c/kg/MS during the peak season and 75c during winter. This is a huge increase from the present 22c for the whole of the season that we are being charged now, says Evansdale director Paul Dennison.

We are a very small cheese factory buying milk from Fonterra and the price of this milk is always a major concern to us.

Fonterra charges dairy companies 22c/kg/MS for transporting milk based on its national average


Small companies face transport cost hike

NEWS BRIEF

Dangerous malesMALES are around twice as likely as females to have a claim accepted for work-related injury, say the latest Statistics New Zealand fi gures.

Last year 176 per 1000 male full-time equiv-alent (FTEs) employees were injured com-pared with 84 per 1000 females. Males also ac-counted for three-quarters of all work-related injury claims.

In 2004 245,000 claims were accepted, an increase of 2% compared with the previous year. Male claims made up 74% of the inju-ries from 214,500 workers. As well 73 claims involved fatal injuries, 69 of them males.

Northland and Gisborne/Hawkes Bay had the highest incidence rates with 191 and 187 claims per 100 FTEs respectively. Wellington had the lowest with 77 claims.

Claims for work-related injuries incurred costs of $177.7 million to the ACC by March 31, 2005.

Relief for Takaka

SMALLER dairy com-panies say they face sub-stantial increase in milk transport charges under a draft ruling by the Com-merce Commission.

The companies oppose the commissions ruling on milk transport charges levied by Fonterra that will remove the national aver-age price paid by buyers across the country.

In their respective sub-missions to the commis-sion, the milk and cheese companies say if Fonterra implements the draft deter-mination, their production costs will rise.

The commission is holding a three-day con-ference in Wellington this

FONTERRA has announced fi nal plans for re-establishing milk-processing operations at its Takaka site, damaged by fi re.

Fonterras manufacturing gen-eral manager Brent Taylor says that the company would spend $30 million to refurbish the sites milk powder plant so it had suffi cient capacity to process milk from the Golden Bay catchment.

The company would not be re-building the butter hall or the ca-sein plant, Taylor says.

The planned changes to the

sites confi guration as part of the refurbishment meant approximate-ly one-third fewer staff would be required at the Takaka site.

Fonterras human resources team and other support staff were already talking to employees and union representatives and work-ing through a range of options for redeployment opportunities, Taylor says.

Taylor says a number of factors had been taken into account in deciding the sites fi nal confi gura-tion.

We appreciate what this deci-sion means to the community, and we have taken various environmen-tal, social and economic considera-tions into account.

We are committed to maintain-ing a presence in Takaka.

Partly that refl ected this regions geography and the diffi culties in transporting milk from Golden Bay to be processed elsewhere, but we were also aware of the need to take a broad view of our place in the community in deciding the sites future, he says.

Sudesh Kissun week to hear submissions on its draft determination released four months ago.

The small dairy com-panies say they are totally dependent on Fonterra for milk supply and prefer the national average transport cost retained.

Oamaru-based Whit-estone Cheese managing director Bob Berry says the draft determination will increase their trans-port costs from 22c/kg/MS to 39c/kg/MS during the peak season and to 99c during winter.

Berry says based on the companys projected purchase of 1.5m litres of milk, the companys annual freight bill will increase by $43,000 and add 24c per kg to the cost

Bob Berry

transport cost.Following an applica-

tion from Open Country Cheese, the commission has ruled that the charges are unreasonable.

It ruled that Fonterra should follow a regional averaging transport cost rather than the national averaging and the charges should refl ect Fonterras actual costs.

Taumaruni Milk

Cooperative chairman Weston Kirton believes Fonterra should have the right to charge a standard transport cost regardless of the distance actually travelled.

These standard charg-es refl ect the uncertainty of the source of supply; in some cases it could be close to its fi nal destina-

tion in others it could be many kilometres away, says Kirton. He believes the commission should up-hold the cooperative nature of the milk industry.

Fonterra says its co-operative status has been simply ignored in favour of the commissions view. However, Open Country says the draft ruling is

fair and should be acceptable to other dairy players.

Open Country direc-tor Wyatt Creech says his company will still pay Fonterra a higher rate than what a commercial transport operator would charge. The commission is expected to give its fi nal ruling next month.

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Bilateral trade priorities: NZs top 10

Access panel slammedSudesh Kissun

A NEW panel appointed by the Government to lead consultation on improving access along waterways has been labelled window-dressing by the National Party.

National agricultural spokesman David Carter be-lieves there is no point in setting off another round of consultation.

While Carter approves the appointment of some panel members, he rejects the reappointment of John Acland as its chairman.

Agriculture Minister Jim Sutton appointed Acland, who chaired the fi rst ministerial group on access.

Other members include former Federated Farmers board member John Aspinall, Bryce Johnson (Fish and Game), Claire Mulcock, Maggie Bayfi eld (Rural Wom-en), Professor Tom Brooking (Otago University), Maori affairs consultant Parekawhia McLean and Opotiki Mayor John Forbes.

Carter says Aspinall has enormous experience on access issues and his appointment is a good thing.

However, the appointment of the panel is just an-other stalling mechanism on the radar screen before the election, he says.

To set off another round of consultations led by same Acland will not achieve anything.

Carter claims that the Government has fi nalised the access legislation and it will be pushed through af-ter the election.

Rural Women New Zealand (RWNZ) has welcomed the appointment of Bayfi eld, its executive offi cer, to the panel.

RWNZ president Sherill Dackers says Bayfi eld brings to the panel extensive experience in working on land management issues and consulting with land-owners.

Dackers says they have long called for a fair and open process regarding any changes to land access.

We expressed strong concerns over the closed na-ture of the process in the past, she says.

We are very pleased the Government has listened and has now established a process to hear the views of interested groups, particularly rural families.

Dackers also welcomed Suttons announcement that there will be no imposition of a fi ve-metre walk-way.

Sutton says the panel will engage in consultations to reach general agreement on what measures could be implemented to improve access to the publicly owned resources of water and fi sh.

THE failure of the G8 sum-mit to progress global trade reform means the focus for multi-lateral trade ini-tiatives is back on the Doha Round.

More progress is be-ing made through bi-lat-eral trade agreements. The NZIER (NZ Institute of Economic Research) made the following summations of critical issues New Zea-land faces with its top 10 export destinations. The summary was published in a June 2005 NZ Trade Consortium working pa-

per it co-authored. (Export fi gures (fob) in NZ$ are to December 31, 2003):

#1 - AustraliaOur main market be-

tween 1860 and 1870, but not again until CER was signed in 1982. Main mer-chandise exports by value are timber, gold, crude pe-troleum and cheese. Total value of all exports, $5.55 billion. Critical issues: the extension of CER into tax and business law harmoni-sation.

#2 United States of America

Post WWII the US be-came a major market for NZ. Mainly buy frozen beef, casein, sheep meat and timbertotal value, $4.01b. Critical issues: Protecting current access to US markets and a pos-sible FTA.

#3 JapanBecame important after

1960, taking mainly NZ aluminium, fresh fruit, cheese and logstotal value, $3.11b. Critical is-sues: improving access to Japans highly protected agricultural markets.

#4 ChinaTrade began to fl ourish

after 1973 when NZ re-es-tablished diplomatic rela-tions with China. Mainly buys milk powder, wool, logs and wood pulptotal value, $1.36b. Critical is-sues: Negotiations towards a FTA hold big possibilities for exporters.

#5 United KingdomThe motherland: became

our largest export market from the late 1870s. Now mainly buys sheep meat, wine, apples and woolto-tal value, $1.32b. Critical

issues: best chance to im-prove access to this impor-tant EU market is through WTO negotiations.

#6 Republic of KoreaDeveloped as a major

export market in the late 1970s, early 1980s. Main exports are logs, frozen beef, wood pulp and sheep-skinstotal value, $988 million. Critical issues: Achieving a reduction in the high trade barriers to primary exports is the most important issue for NZs trade with Korea.

#7 Germany

Became a small but signifi cant market for NZ commodity products in the 1960s. Mainly takes sheep meat, casein, venison and wooltotal value, $728m. Critical issues: Reforming the EUs agricultural poli-cies may allow NZ primary exporters to increase their sales to this large market.

#8 TaiwanExports to Taiwan grew

most rapidly after the mid-1980s. Buy mainly frozen beef, milk powder, sheep meat and fresh fruitto-tal value, $621m. Criti-cal issues: a reduction of high tariffs on agricultural products is the focus of our trade policy with Taiwan.

#9 BelgiumAn important entry port

for our exports in the 1950s and 60s, it has consistently been in our top 20. Strate-gically important as a hub for our major exporters. Big buys include butter, sheep meat, cheese and

wooltotal value, $621m, although this fi gure is in-fl ated because much NZ produce is redistributed in-side the EU. Critical issues: Belgiums importance as a point of entry to the EU will only grow as it ex-pands into Eastern Europe, making it even more valu-able to our exporters.

#10 Hong KongAn important and grow-

ing market for our exports since mid 1970s. Very lib-eral trade rules mean ag-ricultural exports face less of the restrictions common in other markets. Biggest buys are crustaceans, kraft paper, milk powder and leather. Total value to NZ, $543m.

The next 10 biggest ex-port destinations for New Zealand in descending or-der are Canada, Malaysia, Philippines, Italy, Mexico, Indonesia, France, Thai-land, Singapore, and Saudi Arabia.

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Vote nowNOMINATIONS are now open for Fonterras Board of Directors, Share-holders Council and Directors Remu-neration Committee elections.

Nominations must be received by the returning offi cer Warwick Lampp of electionz.com, by noon on Friday, August 19.

Candidates for the elections have to be Fonterra shareholders, or a share-holder of a company or a member of a partnership or entity that is. Can-didates must also be nominated and seconded by Fonterra shareholders. Nomination forms are available from the returning offi cer, Election Hotline tel. 0508 666 446.

Nominations can be faxed to 0508 666 447 or mailed to the returning of-fi cer, PO Box 5252, Christchurch.

The Directors and Directors Remu-neration Committee members will be elected in a nationwide vote. Council-lors will be elected by shareholders in 10 wards.

Fonterra directors Greg Gent, Earl Rattray, and Jim van der Poel have ad-vised they will stand for re-election in the Fonterra directors election.

Three shareholder-elected direc-tors, a third of council and two mem-bers of the Directors Remuneration Committee retire annually by rotation. There is a by-election in one additional Shareholders Council ward because a casual vacancy has arisen.

No easy fi x for health issuesRoss Annabell

NO end of complaints were aired by the nations top medi-cos at the 2005 Rural Health Summit conference in Wel-lington on July 27-29.

Financial and organisa-tional factors hamstringing rural medical treatment were graphically illustrated by doc-tors reports of their experi-ences treating emergencies ranging from road trauma to heart attack, while facing delays and hang-ups through lack of medical facilities, staff, training, transport, and communications.

Doctors presented case his-tories illustrating discrimina-tion in treatments available to rural communities, compared to urban centres, uncoordi-nated contact between rural and major hospitals leading to costly and unsatisfactory patient outcomes, and lack of training and inadequate re-wards for rural GPs.

The brightest outcomes of the three-day summit were the appointment of a working party of 11 rural hospital doc-tors and GPs to set up a cur-riculum and training plan for rural doctors.

It was generally acknowl-edged that progress could come from rapid development

and expansion of telemedi-cine, using telecommunica-tions, televised operations and examinations directed by skilled distant surgeons, with faster and better coverage from cellphone and satellite c o m m u n i c a -tions.

Case histo-ries presented by individual doc-tors during the conference illus-trate some of the problems.

Dr Stuart Gardiner, chief medical offi cer at Tokoroa Hos-pital, gave de-tails of treatment of an elderly male diabetic pa-tient with chronic acute renal failure, pneumonia, impaired liver, and coughing blood. He was transferred 90km back-wards and forwards between Tokoroa and Waikato hospi-tals a number of times over more than 50 days, before dy-ing peacefully in his sleep.

Dr Tim Malloy, Wellsford, chairman of New Zealands Rural General Practice Net-work, presented the case his-tory of a 65-year-old retired, poverty-stricken Maori male cardiac patient who lived 25 minutes from a surgery down

a winding metal road. After treatment at Whangamata Hospital, transfer to Auckland cardiac unit, subsequent col-lapses and further treatment, the patient died in his sleep.

Molloy says the patient was typical of Maori men, who dont seek medical atten-tion early, be-cause preven-tive messages are not getting through. This was an impor-tant cultural barrier for Maori men pa r t i cu la r ly because mana

and pride come before health, discouraging them from want-ing to bother people and make a fuss about their illness.

It is costing them their lives. Their attitude is that if you die with your mana intact your age is irrelevant.

Keynote international speaker professor Paul Worley, director of the Rural Clinical School at Flinders University, Adelaide, says there is a clear message from the case histo-ries of different value systems operating in the rural commu-nities, and the way they can often lead to late presentation

of serious illness.It seems apparent from the

presentations that there has been discrimination against the treatments that are avail-able to rural communities compared to those in urban localities, and this needs to be addressed speedily --par-ticularly the issue of acute infarcts [inadequate supply of blood].

There was evidence of in-appropriate referrals, of pre-mature death from prevent-able disease, and of instances where patients can get lost and actually got sicker in an uncoordinated system.

We have to determine who actually is responsible in patient care. Does centralised but uncoordinated effi ciency end up actually costing more to the community, the funders and the people involved?

A good example was where the last 60 days of a mans life ended up costing a great deal more because of a centralised but uncoordinated system that was meant to be more effi -cient.

It was evident that health professionals work in public, unpredictable and uncontrol-lable environments, and the point came over repeatedly that time, access and high-level training is absolutely

crucial.Our policies have to sup-

port the high level training that rural professionals have gone out of their way to at-tain.

He says New Zealand and Australia share serious rural health problems with much of the rest of the world.

Statistically, the further people live from cities, the more they are likely to die.

Meanwhile, funding is not yet in sight for the main aim of the three-day 2005 Sum-mit Health conference -- giv-ing medical students a year in country practise.

The rural health strategy wants qualifi ed medical stu-dents to seek jobs in rural areas to help solve what is described as a career black hole and help solve the rural doctor shortage.

But funding is the prob-lem to get up to 40 fi fth-year medical students out into ru-ral areas for a year. Rurally selected third-year students now in training are due to go out in 18 months, but the uni-versities have heard nothing about funding.

Dr Pat Farry, director of Dunedin School of Medicine and co-convener of the sum-mit, says universities need $12-$15 million.

Paul Worley


Top honour for KiwiFONTERRA dairy scientist Dr Peter Munro has become the sixth New Zea-lander to win the American Dairy Sci-ence Associations highest research and development award for his contribution to the industry.

Munro, Fonterras general manager of planning and integration, was present-ed the 2005 Danisco (formerly called Marschall Rhodia) International Dairy Science Award in Ohio.

The award, established in 1980, rec-ognises outstanding accomplishments in research and development outside the US and Canada in chemistry, biochemistry, microbiology, technology or engineering in the dairy foods industries.

Fonterras director of innovation Bob Major says the award is a tribute to Mun-ros outstanding contribution to the New Zealand dairy industry and to dairy sci-ence internationally.

All New Zealanders should take tremendous pride in the achievement of scientists like Dr Munro, who are using their knowledge and skills to drive in-novation and increase New Zealands value-add capabilities in the global mar-ketplace.

Munro joined the former Dairy Re-search Institute, now Fonterra Innova-tion, in 1993 as programme leader in functionality to provide scientifi c and technological leadership to improve un-derstanding of milk protein and milk powder.

Commercial successes included de-velopment of a heat stable whey protein concentrate, improvements in instant

whole milk powder functionality and de-velopment of a milk protein concentrate for use in cheese-making.

From 1998, as general manager of process technology, the work in his de-velopment programme on novel cheese fl avour technologies, novel whey protein isolate technologies, dehydration tech-nologies, probiotics (benefi cial lactic acid bacteria) and other bioactive milk components led to 20 new patents.

With the establishment of Fonterra Marketing and Innovation at Palmerston North in 2003, Munro was appointed options manager for new business, with responsibility for evaluating the techni-cal, market and fi nancial feasibility of all projects within M&I. He was recently appointed general manager of planning and integration.

Munro says the biggest change in the industry is the approach to R&D, which is much more systematic than it used to be.

Since M&I was formed, theres bet-ter focus on business outcomes from our R&D activities. We look at projects across the whole portfolio and we screen, value and prioritise them through an in-novation pipeline. Using this rigorous process undoubtedly results in better allocation of resources and better out-comes.

A graduate of The University of Auckland with a BE with fi rst-class honours)in chemical and materials engi-neering, Munro completed his doctorate at University College, University of Lon-don, in 1976.

Massey, Lincoln team upDAIRY research and manufacture will benefi t from a joint project newly announced by Massey and Lincoln Universities and primary producer groups.

So far $20 million has been granted the scheme, aimed at integrating the research and edu-cational capabilities of the universi-ties with industry needs.

Under a Govern-ment agriculture and life sciences partnership, the two universities will work with farmer and grower groups to create the most infl uential centre of research-led education in the agricultural and life sciences in the southern hemi-sphere, Massey University says.

Industry partners are Dairy InSight, Dexcel, Fonterra, Dairy Companies Association of NZ, Meat & Wool NZ, AGMARDT, NZ Fruitgrowers Federation and NZ Vegetable & Potato Growers Federation (Vegfed).

The scheme will promote outstanding individuals consist-ently upgrading their skills and capability, a steady infl ux of New

Zeakands best and brightest minds, and leading-edge re-search.

Dexcel chairman and Fonterra director Jim van der Poel says for New Zealand to maintain its status as a world leader it needs a world-

class faculty and this partnership is a crucial step in this direction.

There is signifi cant focus on improving productivity in the dairy industry, and a strategic framework has been developed to identify and enhance priority areas such as environmental sustainabili-ty, forage and knowledge transfer, van der Poel says. The partnership

is well aligned with these industry objectives.

Massey University Vice-Chan-cellor Judith Kinnear says this is a landmark opportunity enabling the strategic alignment of New Zealands $17b agricultural indus-

try with its two leading agricul-tural universities and a powerful catalyst for further engagement and investment. Lincoln Universi-ty Vice-Chancellor Roger Field says the two universities have sought opportunities to work more closely together for some time and see scope for real and meaningful collaboration.

Dairy research will benefi t from the partnership.


Reliable Waitaki water now in doubtHeather Chalmers

KELVIN Weir has lived and farmed alongside the banks of the Waitaki River all his life.

The massive braided river dividing North Ota-go and South Canterbury shapes the lives of many who live along it -- whether because of its environmen-tal impact, recreational op-portunities, irrigation mak-ing farmland productive, and its substantial role in hydroelectric generation.

Weir is well aware of the difference irrigation from the river has made to the Waitaki Valley, remember-ing dust storms and fewer trees as a child. Its a

beautiful valley and irriga-tion has helped that.

Confi dence in the riv-ers ability to supply reli-able irrigation water has prompted Kelvin and his wife Debbie to undertake a large-scale dairy conver-sion development between Georgetown and Duntroon in North Otago.

In its fi rst season 2005-06, the 450ha former sheep and beef farm will milk 840 cows in conjunction with sharemilkers Matthew and Julie Ross.

However, a history of virtually 100% reliability of irrigation water from the Waitaki is now at risk from a Government-initiated Waitaki Catchment Water

Allocation Board which is reviewing the balance be-tween the rivers compet-ing uses.

In its draft plan the board recommended lifting the rivers minimum fl ows, which would result in more water fl owing out to sea and less being available for irrigation. A further seven weeks of hearings have just been completed and the board now has until Sep-tember 30 to complete its fi nal plan.

Local farmers, like the Weirs, are hoping the board will revert back to the sta-tus quo, otherwise they face the daunting prospect of irrigation restrictions, likely to be severe in dry

North Otago farmer Kelvin Weir says reliable irrigation water from the Waitaki River in the background is key to the success of his large-scale dairy conversion.

years, and reduced profi t-ability.

Weir says he bought the property because it was part of the Maerewhenua irrigation scheme which takes water directly from the Waitaki River and has a record of no irrigation re-strictions.

The property also still had 32 years to run on an existing 35-year water con-sent. Because of this we paid a high price for the land and have spent a lot of money developing it. Its a huge investment and without water it just doesnt work. A key to farming is non-restricted water.

The Weirs previously lived across the road, con-verting that property to dairy fi ve years ago, before it was bought by Meridian Energy for the now-aban-doned Project Aqua canal-based power scheme.

Since moving to the new property, the Weirs have totally redeveloped 150ha of borderdykes on the fl ats at a cost of $4000/ha to make them more water-ef-fi cient.

While the old borders only watered 70% and took 106 hours, the recontoured, laser-levelled borders pro-vide 97% coverage and take 90 hours. The new

borders are 80-100m wide compared with about 20m previously, and are shorter in length at 220-230m compared with 400m, pro-viding a quicker, more ef-fi cient watering.

The problem with the boards plan -- in part to encourage irrigators to be more effi cient with their water -- is that not every-body can go to spray or centre pivot because of the shape of their land, which is why we rebordered. It makes farmers stop in-vesting in rebordering and makes their irrigation more effi cient, but it may not be worth it if the irrigation

water is restricted.Weir says there needed

to be a balance on the Wai-taki plains of border and spray irrigation. Of the borderdyke on the plains, about a third is believed to have been upgraded.

As well as the border-dykes, the property also has two 3m bores on the fl at. Water from these is pumped to 300ha of hill behind the fl at, of which 220ha is K-line irrigated with the remainder dry-land.

If the borderdykes are not able to be irrigated, then the shallow bores would also struggle to wa-ter the hill. As part of its resource consent with En-vironment Canterbury, the underground water must be tested every four months for nitrate, e-coli and col-iforms.

Weir says it was ideal dairy country because it had a mix of light ground on the fl at and heavier ground on the hill.

The property will be run as a self-contained dairy unit with wintering of cows on-farm.

The conversion has in-cluded regrassing, refenc-ing and new laneways, as well as a 60-bail rotary dairy.

Heather Chalmers

FARMERS in North Otago and South Canterbury can now only wait to fi nd out whether they face the pros-pect of irrigation restrictions from the Waitaki River.

After 1200 submissions and seven weeks of hear-

ings, the Waitaki Catchment Water Allocation Board now has until September 30 to prepare its fi nal plan which can only be appealed on points of law. Envi-ronment Canterbury will administer the fi nal version.

Farmers are hoping the fi nal plan will mark a return to the status quo which until now has enabled irrigators to water with almost 100% reliability from the Waitaki River, by far the biggest of Canterburys braided rivers. Irrigation reliability will drop to an estimated 88.5% -- rated as poor or very poor -- if increased minimum fl ows outlined in the boards draft plan are adopted.

The fi rst of its type, the Government-initiated allocation board was set up to review the Wait-akis competing water uses in response to Meridian Energys now abandoned Project Aqua canal-based power scheme on the river.

Lower Waitaki Irrigation Company chairman Chris Dennison told the hearings that its scheme which covers 19,300ha of productive farmland, much of it in dairy, had never faced water restrictions in its 30 years. The scheme had brought prosperity and stabil-ity to a district renowned for lingering droughts and unreliable rainfall.

Dairy Holdings Ltd general manager Colin Glass told the board that of the corporate farmers 44 dairy farms in the South Island and Tasmania, the eight on the Waitaki Plains were the most profi table.

Converting the Waitaki plains farms from bor-derdyke to spray irrigation to meet the draft plans effi ciency levels would cost the company up to $4.6 million and increase annual operating costs by $300,000 with no additional production, he says.

A North Otago Federated Farmers submission to the board says the additional power cost of convert-ing to spray irrigation was estimated at 1000kwh/ha, which for the Morven-Glenavy irrigation scheme in South Canterbury alone equates to an annual increase of 15,776,000kWh.

The additional capital costs to landowners in con-verting are estimated at $650/ha, with an additional annual cost of $150/ha for power and labour. For an average 200ha property, this equates to a capital investment of $130,000.

Landowners kept in limbo

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14 Dairying Today August, 2005COMMENT

Transpower issue must be addressed before

To page 15

WITH the election loom-ing, it is an opportune time to highlight the political issues lurking behind the Transpower 400kV transmission line project. It is especially fi tting since the Government is doing its best to play down the issue.

This must not be allowed to happen for several reasons. First, the election may provide an opportunity to force Transpowers plans off the books.

Second, a decision will be made before 2007 when

Kip Bodle is the managing director of Deosan New Zealand. He is also involved in a 1400ha dairy and drystock family operation in the heart of Waikato which is to be traversed by Transpowers 400-kV transmission line route. Before Bodle became involved with Deosan, he spent time as a planning lawyer in cases involving Designations under the Resource Management Act, and on issues relating to Compulsory Acquisitions under the Public Works Act.He is adamant that Transpower needs to be brought to task over an unsound process for selecting the proposed pylon route. This is the last of a series of editorials in which Bodle has identifi ed some of its fundamental fl aws.

the construction of the transmission line suppos-edly needs to begin.

So the incoming party will be the government that makes the fi nal call. And third, once a decision is made that will be it - the line will be around for the next 50 years.

We can also be certain that affected landowners will not be on the Labour Partys election bribery list.

Lets begin with the party policies. Labours policies on the matter are, as one would expect, am-

biguous. In a recent speech to the Energy Federation annual meeting, Trevor Mallard touched on the subject of ensuring the future security of electric-ity supply to Auckland and Northland.

He conveniently reminded listeners that the major decisions surrounding the 400kV project would be made by Electricity Commission and Resource Management Act bureaucrats.

Images of Mallard dressed as Pontius Pilate, with landowners nailed to

power pylons immediately sprang to mind. It would be interesting to see how many of the sacrifi cial lambs were voters within National Party electorates.

Has anyone compared the number of National seats traversed by the route, to the number of Labour seats? Now these statistics would be interest-ing reading.

Lindsay Tisch, National MP for Piako, expressed party policy views on the 400kV project in a news release on May 15. The thrust of Tischs message

was that supply alterna-tives, namely generation and DC, have not been adequately considered.

On the face of it, the party policies are not en-tirely clear. Despite this, it would seem that Labour is more comfortable with the transmission alternative than National.

On the other hand, it may all be a facade with generation in Auckland being the secretly favoured option.

My point is, however,

who would know? The only sure thing is that the political parties are keen to postpone the issue until after the election and not otherwise.

Listening to Labour politicians gives one the impression that decisions surrounding the 400kV project are politically neu-tral. This is far from the truth for several reasons.

Pylons are in fact a product of politics. If it hadnt been for Muldoon, pylons might not have

been so plentiful, because generation might have been positioned nearer to the biggest loads (such as Auckland).

The rules governing the electricity system (the Electricity Act) have also infl uenced the rate of new-build over green fi elds in previous years. The politi-cians create these rules.

But most importantly it must be remembered that the Government owns the countrys pylons. Trans-

15Dairying TodayAugust, 2005 COMMENT

the electionFrom page 14

Politicians must be held to account before the election. All will be lost in the next term.

power is a state-owned enterprise, which earns the Government a tidy annual profi t.

Last year, Transpower pocketed a six-month surplus of $77.3 million (after tax, ending Decem-ber 31, 2004). More pylons and pipelines leading to Auckland will surely equal a fatter Government wallet. So, it is hardly surprising that Labour and National are pledg-ing to retain ownership of Transpower for the coming political term.

The Government is in fairly healthy position when one considers that its pylons, insulators and conductors run along easements over privately owned land which were bought (or acquired) based on the farming returns of the day and not the lands ability to convey electric-ity successfully.

It should also be noted that if Transpower (also known as the Government) doesnt like a landowners asking price, the compul-sory acquisition process can be used to acquire easements under the Public Works Act at a very mod-est price, all in the name of the public good.

I wonder whether elec-tion bribes or third-term ministerial superannuation packages qualify as public good?

So how does an Auck-land-based generation alternative stand a chance against a transmission op-tion conveying electricity all the way from the South Island?

In terms of physical effi ciency, it wins hands-down.

However, in terms of the fatness of the Govern-ments purse it is likely to lose outright, particularly if the generator is a pri-vately owned company. On this point, it is worth noting that a number of organisations have offered to build new generation plants in or near Auckland.

These offers can be viewed on the Electric-ity Commissions website page recording the Grid upgrade submissions.

With such a huge potential for confl icts of interest in the Govern-ment ranks, one would expect that this potential was closely monitored and regulated by an independ-ent body similar to that of the Reserve Bank.

But alas, this is not the case. We have a body called the Electricity Commission, whose task is to regulate the operation of the electricity industry and markets [including Transpower], to ensure electricity is produced and

delivered toconsumers in an effi cient, fair, reli-able and environmentally sustainable manner.

However, the Electricity Commission is a Crown entity set up under the Electricity Act to oversee New Zealands electricity industry and markets.

The objectives of the commission, which are in the Electricity Act and its underbody of rules and

regulation, are determined by the Government.

And to assist their cause even more, the Resource Management Act and the Public Works Act also grant the Government strong powers in this regard, which are only checked by the upper levels of the courts.

So it would seem that the accused (Transpower), judge (Government) and jury (the commission) are all one in the same and will be well placed to increase their fi nancial take to record highs - un-checked. Now if that isnt a confl ict of interest, what is?

The Parliamentary Commissioner for the Environment (PCE) paints a similar but subtle picture in a recently issued report. One is left pondering over the adequacy of institu-tional arrangements that are shaping our electric-ity industry.

Another recent report by the PCE highlights more directly, the short-falls of the Electricity Commission. I strongly recommend that these reports are read and considered in relation to Transpowers 400kV trans-mission line project.

I have only touched the tip of an enormous iceberg. Just look at todays aver-age price of electricity at around 18c/kWh, which is

higher than in most states in Australia and the US.

The mess that we are facing is a direct result of the interventions and ex-periments by current and previous Governments. The 400kV transmission line project is the negative manifestation and the 600 landowners and townspeo-ple will be the Govern-ments unwilling sacrifi ce.

The construction of the

400kV transmission line, if allowed to proceed, will fatten the Governments purse and deliver a crush-ing blow to the property rights regime of New Zea-land. No wonder Pontius Pilate Mallard is washing his hands.

The affected landown-ers and townspeople only have days rather than weeks to make this a mainstream election issue. I suggest that the attention of the nation be captured sooner rather than later.

A political spectacle will be a cheaper and more effective means to promote our cause rather than trudging through the courts until our wallets are empty.

The politicians must be forced onto the alter of accountability before the election, whether they like it or not.

Otherwise all will be lost in the coming term. I believe a march on Wel-lington is in order.

To Parliament, Trans-power and the commission we must go. These will be the places from which we can put fi re into the debate and burn effi gies of Craven.

This is something the media will not be able to ignore.

The 400kV pylons must become a pre-election pain and not another product of politics.

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16 Dairying Today August, 2005WORLD

EU expects medium-term agricultural growthAlan Harman

THE European Union says the medium-term perspec-tives for the EU meat and dairy markets appear rela-tively favourable.

These medium-term projections should lead to a 11.7 % growth in EU-25 agricultural income be-tween 2004 and 2012 in real terms, a new Euro-pean Commission report says.

The report says the EU meat markets have returned to a more normal situation after the extreme market

conditions of the past few years when they were hit by the second BSE scare, an FMD outbreak in 2001 and avian fl u in 2003.

The current situation in the beef market -- where consumption is higher than domestic production -- is expected to persist over the 2005-2012 period.

EU-25 beef and veal consumption recovered rapidly after the BSE cri-sis and was higher than production in 2003 for the fi rst time in 20 years.

It is expected to remain so over the projection pe-

riod as production would decrease to around 7.6 mil-lion tonnes by 2012, in line with the structural reduc-tion of the dairy herd and the impact of the introduc-tion of the single farm pay-ment.

A tight domestic supply and a steady demand are projected to keep beef pric-es at a relatively high level, attracting more imports en-tering at full duty, notably from South America.

The EU dairy sector is forecast to show a decline in the production of butter and SMP over the medium

term as more milk is used for the production of cheese and other high value-added dairy products.

The overall increase in domestic milk demand in the form of dairy products should result in lower but-ter and SMP exports and a limited increase in cheese exports.

Milk production in the EU-25 is projected to in-crease slightly over the medium term, in line with quota increases, to reach the level of 145 million tonnes by 2012.

Milk production in the new member states, which account for around 15 % of total EU production, is projected to remain stable at about 22 million tonnes, as increasing deliveries to dairies -- in line with higher quotas -- are offset by the reduction in subsist-ence milk production.

Production of butter in the new member states is forecast to show some short-term growth in re-sponse to price increases towards EU levels.

Cheese production and consumption are expected to maintain their sustained growth after the slowdown observed in 2002, thanks to the gradual rebound of economic growth.

These projections re-sult in an overall increase

in domestic milk demand in the form of dairy prod-ucts, the report says. As supply remains limited by quotas, butter and SMP exports should shrink and cheese exports show only a limited increase.

The report says the in-come gain of 11.7% be-tween 2004 and 2012 marked differences be-tween the EU-15 and the new member states.

Whereas agricultural income in the EU-15 would show a rather modest devel-opment with a 4% growth over the 2004-2012 period, it has a more pronounced and positive trend in the new member states where it would rise steadily by 50.4% over the projection period.

The report says short-term developments on world agricultural markets have recently been marked by the wide price fl uctua-tions of 2003 and 2004.

Over the medium term, world agricultural markets are projected to be essen-tially supported by rising food demand driven by an improved macroeconomic environment, higher popu-lation, urbanisation and changes in dietary pat-terns, it says.

Meat markets, disrupted by trade restrictions fol-lowing animal diseases -- notably avian fl u in South-east Asia and BSE in North America should expand production, consumption and trade with world meat prices showing moderate strength.

Prospects for ris-ing meat demand would mainly emerge from a fa-vourable macroeconomic environment of sustained income growth, notably in Asia and Latin America, it says. The EU says the medium-term outlook for the dairy sector is expected to remain dominated by a strong expansion in global demand for dairy products.

The EU dairy sector will produce more, in line with quota increases, says a European Commission report.

Alan Harman

PARMALAT Australia Ltd recalled thousands of bottles of fresh milk in Victoria and South Australia because of a tainted fl avour.

It says it was conducting a voluntary recall of the products as a precautionary measure be-cause some of them had a fl avour taint from a batch of two litre plastic milk bottles.

Dozens of different products, all in two-litre bottles and produced with use by dates be-tween August 6 and August 17, are involved.

It is the second recall in two months after milk was contaminated by a cleaning solution containing caustic soda accidentally contami-nated in the same two states.

A spokesman said the milk in some plastic bottles has absorbed a taint from the plastic containers. The source of the taint was being investigated.

Parmalat says there was no health threat to consumers but the voluntary recall was a pre-cautionary measure. Customers were asked to return the products to the point of purchase for a full refund.

Parmalat recallNEWS BRIEFNEWS BRIEF


Farm safety initiatives win awardsTWO programmes aimed at improv-ing safety on farms and lifestyle blocks are among the winners of the fi rst New Zealand Community Safety and Injury Prevention Awards.

FarmSafe, a nationwide programme aimed at changing the behaviour and attitude of farmers, was the joint win-ner in its category.

A second rural entry from Injury Free Waimakariri was also commend-ed in the awards. The groups Down the Back Paddock is a programme de-signed for primary and intermediate schools that highlights the safety dan-gers of farms and lifestyle blocks.

The awards are part of the inaugural Safety NZ Week, (August 7-13) which aims to put the spotlight on New Zea-

lands injury rates and encourage Kiwis to keep themselves and those around them safe.

The winners were announced at a safety expo in Wellingtons Civic Square. They were chosen from 35 en-tries from all over New Zealand.

The main objective of FarmSafe is to change farmer and farm employee attitudes and subsequent behaviour towards safety on farms. More than 14,500 farm owners, staff and their families have been involved in Farm-Safe training workshops in the past two years.

The Down the Back Paddock pro-gramme from Injury Free Waimakariri incorporates classroom teaching and Farm Safety Days. It was piloted in two

schools in the last term of 2004 and has since been implemented at two more rural schools. The aim is to deliver Down the Back Paddock in one school per term.

The safety and injury prevention awards were developed by the Safe Communities Foundation of New Zea-land in conjunction with ACC. They are designed to recognise, reward and promote excellence in injury preven-tion and safety promotion.

Getting people to change their be-haviour isnt something that can be done quickly or something that can be done alone, says ACC chief executive Garry Wilson.

Accident statistics on farms are alarmingly high and it is particularly

encouraging to see these programmes being taken up by rural communities, farmers, their employees and their families.

Dr Carolyn Coggan, director of the Safe Communities Foundation of New Zealand says the awards were an excel-lent opportunity to reward people work-ing day after day to reduce the number of injuries in New Zealand.

I am delighted with the quality of entries and it is very encouraging to hear about new initiatives and pro-grammes being developed to tackle the unacceptable and unnecessary rate of injuries in New Zealand.

The FarmSafe programme has been delivered to more than 14,500 farm owners, staff and families over the past

two years. The nationwide programme is aimed at the agriculture and horticul-ture industries where injury statistics are alarmingly high.

FarmSafe was set up in response to a drive by ACC and Federated Farmers to reduce injuries on farms. FarmSafe is a consortium made up of three organisa-tions -- Agriculture ITO, Agriculture NZ and Telford Rural Polytechnic.

A free one-day introductory work-shop, FarmSafe Awareness, received such an overwhelming response that two further programmes were launched. FarmSafe Plans provides the skills and knowledge needed to prepare and ac-tion an effective farm safety plan.

FarmSafe Skills teaches and assesses competence in practical farming.

Fert payout $20/tBALLANCE Agri-Nutri-ents increased payout to paid up sharehold-ers by the equivalent of $20 for every tonne of fertiliser purchased, up 8%, after a strong fi nancial performance for the year ending May 31, 2005.

The payout is made up of a rebate of $16.42 average a tonne, up $1.42, and a fully imputed divi-dend of 8c a share, the same as last year.

This makes the combined rebate and dividend paid to farm-ers for the year $20.8 million, up 13%.

Ballance reported a higher volume sales, up 5% at 1.5 million tonnes. All regions achieved the same or better sales tonnage than last year, gener-ating 10% more rev-enue at $458m.

The operating sur-plus, at $40.9m, is down 17%, caused by decision in the fi rst six months of the year to absorb additional shipping, fuel and in-ternational raw mate-rial costs by holding fertiliser prices down.

Twenty million dol-lars went into capital investment, the big-gest share towards expanding a national distribution network of services centres and distribution stores, and advanced infor-mation technology systems.

The cooperative also paid out $48.1m, the 20% sharehold-ing of Ballance held by Yara, returning Bal-lance to 100% farmer shareholder owner-ship. Total assets at year end were $360m, up 10%.

"We've been grazing AberDart for 2 seasons now andwe record an increase in milk production and milksolids every time the cows graze it. We've also usedit on our deer farm and been amazed at the increasein velvet production when the spikers graze AberDart."

Harry KoopmansMethven, Mid Canterbury

Phone 03-358 9748, Mobile 021-043 0021Email [email protected] Germinal Seeds NZ Ltd

AberDart

HSGHIGH SUGAR GRASS

Perennial Ryegrass

Phone 03-358 9748, Mobile 021-043 0021Email [email protected] Germinal Seeds NZ Ltd

12491


Pedersen wants R&D back on priority listTHE new president of Federated Farmers has put primary industry research spending near the top of his wish list as he takes the reins from Tom Lambie.

Lambie, recently retired president of Federated Farm-ers says it was an absolute privilege to have led 18,000 farmers for the past three years.

When Federated Farmers give you opportunities in leadership, both in New Zealand and overseas you get exposed to a huge number of people with a huge number of ideas on a range of issues, he says.

His replacement Charlie Pedersen will bring a different style to the presi-dency. He certainly brings a different reputation, but says he is ready to shed his image as a fi rebrand farmers leader.

And he is fi rm on issues he wants to tackle. Pedersen wants to see more government money allocated for spending on research and development in the sector.

New Zealands agricultural research and development allocation of $70m makes up 1.1% of the gross domestic product (GDP).

The US spends 2.8% of its GDP on research and devel-opment, Australia 1.6%, and the European Union plans to

increase its budget to 3% of its massive GDP by 2010.Pedersen argues that while farmers spend a lot of their

own money in research and development through levy or-ganisations the public is not investing as much in agri-

culture as it should be.We shouldnt shirk away from it; we

should not see it as old hat and unfashion-able and should see this is the future.

Pedersen has other goals he is deter-mined to achieve during his tenure.

One of the biggest challenges facing rural New Zealand, he says, is reinforcing the importance of agriculture to the main-stream. Nowadays, he says, many people are embarrassed to be associated with an agricultural nation.

To achieve his goals will require a make-over of tactics and style for Pedersen. The days of shooting off his mouth on issues

concerning farmers and getting away with it are a thing of the past. At the back of his mind will remain his fathers advice that a person learns more by keeping his mouth shut and ears open.

Pedersen acknowledges the criticism he faced for be-ing outspoken and harsh.

As the vice president for the past three years, I was fulfi lling a role and I think people will soon notice that I

have changed to a different role.But can a leopard really can change its spots? And after all, the federations relationship with the cur-

rent government whose policies they try and infl uence - can only be described as terse.

Agriculture Minister Jim Sutton and the lobbyists have conducted a highly public spat throughout 2005 which stemmed from their acute differences over land access.

Pedersen admits the federations relationship with Sut-ton is tense, although the two parties appeared to have called a truce at the recent federation conference. We would have no trouble working with him should he remain the minister for agriculture in the next Government.

In his acceptance speech before 100 Federation Farm-ers delegates in Hamilton, Pedersen said hes looking for-ward to his traditional three-year term but knows the next three years will be different to anything he has experi-enced in the 15 years since he started with the federation at Foxton.

Charlie Pedersen

Far from being a sun-set industry, agriculture is New Zealands economic present and future. Charlie Pedersen says more should be spent on agricultural R&D.

Keep current driving ageINCREASING the minimum driving age would disadvantage thousands of respon-sible teenagers for no benefi t, said Charlie Pedersen, pesident of Federated Farmers.

While many New Zealanders thoughts are with the families of the Hastings youths killed on Friday [July 29], raising the mini-mum driving age will not solve the problem of road deaths, said Pedersen.

Federated Farm-ers strongly opposes the notion that the minimum driving age should rise to 16 or 17. Many rural people rely on the ability of their 15 and 16 year olds to drive themselves and their siblings home from school and extra curricular events, as there is no public transport in the country.

The issue of an ap-propriate driving age was thoroughly and

calmly evaluated by government in 1998. The evidence was clear that age alone is not the key factor in road accidents involv-ing young drivers.

International re-search concluded that age and experience were important and that drivers, regardless of age, were a greater risk during their fi rst few years driving, said Pedersen.

As a result, New Zealand sensibly put in place a graduated driver licensing system with restrictions on newly licensed drivers.

Fifteen year olds cannot gain an unrestricted right to drive. The absolute minimum age this can occur is 16 years, if they have passed an approved driving course. Otherwise the absolute minimum at which a young person can drive without re-strictions is 17 years, said Pedersen.

Gone to the dogsLAST week, politicians seemed to be devoting more time to dog-re-lated issues than anything else.

The Nats and Labour blocked newsroom fax machines with their ongoing argy-bargy about some draft proposal about dog welfare that is nowhere near becoming law, then the Feds started barking about microchipping again.

The mock hysteria coming from the Nats PR machine was the most laughable, however. They claimed something to the effect that La-bour was going to force farmers to clean the scraps from the dogs bowls every day. Apart from the fact that this is wrong, how many farm dogs leave bloody scraps in their bowl?

And you thought tax and race relations were the major election issues!

20 Dairying Today August, 2005

Opinion

Milking it

EDITORIALEDITORIAL

BASED on its track record downunder, its easy to form the opinion that Fonterra is not the worlds greatest deal-maker.

It is a commodity trader and very good at it too, but it does not seem to perform well outside that comfort zone, refl ected in the poor performance of its value-add business.

The deal with that king of deal-makers Graeme Hart -- swapping Meadow Fresh assets for New Zealand Dairy Foods assets -- is the latest exam-ple.

This deal has Fonterra buying back some key brands, like Anchor, which it sold following the merger of Kiwi and Dairy Group. Fonterra is trad-ing a big chunk of Meadow Fresh plus writing Hart a cheque for $338 million. Hart effectively doubles his money -- he bought NZDF for just over $300m -- and, once again, Fonterras shareholders are out of pocket.

If the Anchor brand is so strategically important, why did Fonterra sell it, along with NZDF, instead of Meadow Fresh?

Other blunders at home have included the fail-ure to grab Williams and Kettle, and to do a deal with Pyne Gould Guinness, RD1s ally in the initial bid for W&K. Wrightson, led by Craig Norgate, ga-zumped them on both counts.

The failed National Foods takeover bid also raised some eyebrows, although Fonterra had its supporters for refusing to overpay for the Austral-ian company.

A deal has been struck with Bonlac suppliers to secure control of their debt-ridden company, so Fonterras Australian strategy is progressing, albeit it in a more parlous state than would have been the case with the much stronger National Foods.

At a much lower level, Fonterra has been criti-cised for the way it handled the sale of the Dairy Exporter, which it inherited with other ex-Dairy Board assets. A major Australian publisher was among a small group asked to tender for the mag-azine, but refused because of the way the deal was being handled.

In the end, Fonterra did a deal with a publisher, structuring it in such a way that all dairy suppliers were forced to continue subsidising the magazine with a subscription deducted from their payout, while still allowing the publisher to rake in suffi -cient advertising revenue to pay its bills and then some.

Without this very generous commitment made by Fonterra on behalf of all dairy farmers, who had no say in the matter, the publisher would be forced to distribute the magazine free to all farmers in the same way all the other agricultural publishers now do. Industry good content, much of which comes free from the likes of Dexcel, would not be com-promised.

Weak at home

EDITOR

Adam FrickerPh 09-913 9632, 021-842 226Email: [email protected]

SALES MANAGER

Ted DarleyPh 07-839 4958, 021-832 505

[email protected]

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