Playing fast and loose with cooperation
Released 05 Aug 2011
James Houghton is Federated Farmers Waikato provincial president
The news that fertiliser cooperative Ballance Agri-Nutrients is planning to pay a record rebate back to its shareholder farmers such as myself, was met with a few expletives around my area last week.
In the corporate world an $85.9 million operating profit, especially when up from $20.7 million the previous year would be great news.
In a co-operative though, it looks plain greedy.
The farmer shareholders will get a record high rebate of $46/tonne plus dividends of $0.10 per share, averaging $50.29/tonne all up.
I'm glad they are going to pay back some of the extra money raised from farmers through raised fertiliser costs over the last season, but they should not be grabbing it in the first place.
New Zealand has a strong tradition of farmer owned co-operative businesses whose imperative has always been in providing essential goods and services for the agricultural community at the best price.
Is it the intention of the Ballance management team to continue to over-charge farmers for fertiliser and grow an empire? Is the goal for next year a $100 million profit? These are questions which farmers need to start asking.
Over the last 12 months Ballance has done well to reduce its debt from $91 million to $38 million, but it also made two acquisitions. Perhaps some of the farmers who have been funding this corporate-style behaviour could have paid off some debt and made acquisitions of their own.
The problem with Ballance and the similarly farmer owned co-operative LIC, which reported a $10 million profit last week, is that they seem to be chasing a profit motive that should not be in their vocabularies.
Time is running out forUnited States' politicians to cooperate on a deal to raise its debt ceiling so it can cover the $306 billion repayments it needs to make next month. Given the ceiling is already a staggering US$14.3 trillion; the situation is like a shopaholic getting a new credit card to pay off a maxed out one.
However, simply defaulting on its August repayments could push the world into financial catastrophe that would make the 2009 Global Financial Crisis seem like a fleeting moment of anxiety.
Hopefully, this economic drama has been resolved by now, but, at time of writing, the world remained on tenterhooks.
There is little we can do about the strength of our dollar against the likes of the greenback and the Euro. Both of these major trade currencies are facing huge economic challenges with sovereign debt of huge importance.
As a result, the New Zealand dollar has been pushed to dizzying heights because, with our export sector rooted in agriculture and forestry commodities, currency market traders see us as a safe bet.
However, farmers in all sectors are starting to feel the pinch from the high dollar eating into farm-gate returns and if the dollar doesn't start trending down soon, it could squeeze the life out of our economic recovery.
I believe Reserve Bank Governor Alan Bollard's decision to hold the Official Cash Rate for the time being is a good one. Exporters, being those who are keeping our country afloat, certainly cannot afford for the kiwi to look any more attractive right at this point.
To create jobs and a healthy, wealthy society we need more money coming into the country than going out. This is something we have recently achieved for the first time in a decade.
This would mean less returns for exporters in New Zealand dollar terms, reducing our trade surplus. Farmers incomes will be eroded by this, meaning they would have less money to spend in New Zealand's provincial towns and cities.
