Aust and NZ dairy farmers joining forces

In this story: Critical mass Quotas are out, competition is in RELATED SITES

SYDNEY, Australia (CNN) -- A trans-Tasman alliance between Australian and New Zealand dairy farmers moves closer to fruition Friday.

Already shareholders in the Victorian dairy company Bonlac Foods have voted to form an alliance with the New Zealand Dairy Board (NZDB). On Friday, farmers in Bega, a dairying center on the Australian east coast, are expected to support the alliance.

"It will be the first international dairy farmers co-operative," says Winston Watt, executive director of the NSW Dairy Farmers Association, "and unambiguously points to the direction we must follow if we are to survive."

Under the Victorian deal, the NZDB will buy 25 percent of Bonlac in order to market leading brands, including Western Star, Mainland, Bega and Bodalla.

Ninety-six percent of dairy farmers in Victoria and Tasmania support the merger, which effectively means the international "co-op" is within reach.

"Bega is not a worry, nothing more than a formality," says Watt.

Critical mass

Across the Tasman, NZDB chief executive Chris Muller says it's important farmers support each other to reach the "critical mass" needed to gain entry to global markets and global supermarket chains.

Not too many years ago dairy co-ops were usually small associations formed to speak with a collective voice when processors and distributors often split the farming communities by a mixture of regional politics and unscrupulous pricing policies.

"That world doesn't exist any more ," Watt told CNN, "nor will we ever see it again. But the principle of strength through numbers is the same today as it was then."

Quotas are out, competition is in

Less than a year ago the Australian dairy industry was deregulated and with it went the quota system and hundreds of farmers.

The quota system set farmers a production target, decided by herd size and grazing conditions, that returned a pre-determined price.

While it created some measure of economic certainty it also removed any incentive to adopt more productive practices simply because there was almost nowhere to sell any excess product.

The system also attracted criticism from farmers about cronyism and corruption.

Watt said initially there was suspicion between Australian and New Zealand dairy farmers that any alliance would be sacrificed to self-interest.

But he says all that is now in the past.

"We either learn to trust each other so we can defend ourselves against some of the world's biggest agribusinesses, not to mention the government-subsidized rural industries, or we go under," says Watt.

"There's no going back - the Bega vote is just another milestone along the global track."

Australian Dairy Farmers Federation
The New Zealand Dairy Board

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