One industry good organisation way forward

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One industry good organisation way forward for dairying

The dairy industry review group established at the request of the Fonterra Shareholders’ Council to examine the effectiveness of industry good delivery has recommended merging the functions of Dairy InSight and Dexcel.

The two organisations fund (Dairy InSight ) and deliver (Dexcel) industry good activities – defined as those which benefit the whole industry and which would not otherwise be provided.

Chairman of the review group Graham Fraser said today submissions received from across the industry were overwhelmingly in favour of creating a single organisation to fund and deliver industry good activities.

“There is virtually universal agreement within the industry that these activities must continue, but that the present structures are not performing as originally intended,” Mr Fraser said.

“The central focus of industry good activities must be the improvement of on-farm profitability. It is crucial to farmers, the industry and, ultimately, the country.

He said details of the way the proposed new organisation would work obviously needed to be worked through.

“What is clear to the review group and is affirmed by both Dairy InSight and Dexcel, is that the creation of a single organisation offers the best means of turning investment dollars into farmer profitability.

Among the key recommendations of the review group is that the proposed new organisation should be farmer-owned and have a majority of levy-paying farmers on its board of directors.

The review group recommends that while funding for on-farm activities should continue to be levy-based, bio-security activities (which are primarily the function of the Animal Health Board) should be directly funded by dairy companies.

“Obviously, its the farmers who pay in the end. But with the suggested split, they would receive a clearer picture of where and how their levy money is spent,” Mr Fraser said.

Mr Fraser said that it was the review group’s view that the present “two headed” structure was inefficient and had not contributed “ in a sufficiently tangible way” to productivity gains on-farm.

“This has been a significant factor influencing negative farmer perceptions of the present arrangements,” he said.

Mr Fraser said the review group had concluded that the new organisation should seek additional non-levy sources of investment to strengthen its capability.

He said the review group was “acutely aware” of the need to manage the transition from the present two-entity model to one where there is a single organisation, structured in such a way as to ensure efficiency and transparency.

“There are a number of models in which show the funder/provider interface can be managed effectively within a single organisation.

“In short this can be done. It must be done and I am sure, will be done.”

He said there would be cost savings from forming a single industry good organisation “but that is not the primary objective. The purpose is to deliver better profitability results for farmers.”

The review group believed it was important to create a new industry good organisation “rather than simply merge Dairy InSight and Dexcel. “

“Realistically, the new organisation will draw most of its staff from Dexcel and Dairy InSight, but a fresh start is needed,” he said.

Mr Fraser said the report had been presented to the Fonterra Shareholders’ Council and was available to interested dairy industry parties.

“Details and timeframes will have to be worked through. But given the broad accord expressed in the submissions to the review, I am confident that farmers will get the outcome they are looking for.

ENDS

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