New Zealand-Meat and Wool industry.

NEW ZEALAND-MEAT AND WOOL INDUSTRIES.

Probably like most of the productive sector I was aware of discussions between the Meat Industry Association and Meat and Wool New Zealand about merging to form a single industry good organisation but unaware of any detail. I’ve since had a look at some of the documentation and would have to say I’m pleased it stalled.

I can remember the days when it seemed there was a siege mentality between the old Meat Board and the meat processors and it is to the credit and benefit of all the parties that has gone. The MIA is represented on the board of MWNZ and there is obviously considerable interaction between the two organisations and that is as it should be.

Looking at the proposal to merge I was concerned at several levels.

For a start I would have hoped farmers would have had more information on what was being proposed, what it would cost, what it was meant to achieve and how it would be run. I acknowledge that there was to be consultation after a heads of agreement had been reached but that discussion would have muddied the Commodity Levy Act meetings in a major way.

In addition the proposed budget caused a shiver.

According to the MWNZ annual report levy income for the coming year is just over $27 million, including wool, down slightly from the previous year. The levy income for meat is $17,812,000. If the two organisations had joined the proposed budget was between $40 and $60 million, half from farmers and half from processors.

My problem here is that on paper the farmer levy will increase from between $3 and $13 million but who is going to pay the processor and exporter levy of between $20 and $30 million?

In the document it says that the cost will be passed on but will an end user pay extra for NZ good activities? I think not. Inevitably that cost will come back to the local producer so instead of paying $17 million a year we will effectively be paying between $40 and $60 million if the merger went ahead according to plan.

The other issue is what will we be paying for?

Looking at the proposed budget the two big ticket articles are market development at between $10 and $15 million and innovation and technology transfer at between $18 and $25 million. I’d like to know a lot more detail but it appears to me as an expanded budget for MWNZ to operate under doing the same things it is doing now. One could suggest it’s simply another way of increasing levies to farmers because it will inevitably be farmers paying for it.

Interestingly the only support for the single organisation came from the two co-ops plus ANZCO which, rumour has it, Alliance is considering purchasing.

All that aside, however, it was interesting to have an initial read of the MWNZ consultation 09 document which is about farmers only contributions and talks about levy hikes to give MWNZ only a similar budget to that of the proposed MIA merger.

In my mind the document isn’t honest for a variety of reasons but the budget talks about a high point of $46 million with a low of $39 million.

In a media release on March 11 however MWNZ talked about raising beef levies from $3.60 an animal to between $5.50 and $6 a head and sheep levies from 40 cents to between 60 and 80 cents. On the upper figure that increases the beef levy by 66% and doubles the sheep levy. By my maths and by taking the upper figures that gives MWNZ the ability to obtain a $51,000,000 levy.

Here’s the rub though. If you add that figure to the $19 million contingent liability we have from the whole Wool Partners International circus farmers are likely to be in the gun for around $70 million.

The MWNZ argument is that farmers will receive a return for every dollar invested but although they quantify some figures they don’t fully explain how they got there.

The Emerson argument is they’re asking for far too much, providing far too little information and in our current recession $70 million is extravagantly out of the ball park.