KEY POINTS:
AgResearch chief executive Andrew West says farmers have always been great supporters of science but they need it now more than ever.
Farming is trying to shrink its environmental footprint and faces demands for improved animal welfare and healthier, better-quality food, "and that needs science", West says.
AgResearch was a sponsor of the premier feature, The Science of Farming, at last week's New Zealand National Agricultural Fieldays.
The Government in March announced its $700 million NZ Fast Forward fund aimed at pastoral and food industries and West says agriculture is back in the spotlight.
"The industry's always kept on going but it hasn't had the sort of backing from central government or the nation that it deserved," he says.
"I think it has now and I don't think that's going to change, I think it's going to grow."
AgResearch was on the same stand at Fieldays as the University of Auckland's biomedical research organisation the Liggins Institute.
The two parties signed an enhanced memorandum of understanding at the show.
Collaboration with Liggins could result in improvements in agriculture, including milk production, lamb growth, resistance to disease and human health.
AgResearch works on areas such as plants, soil, livestock and food.
"What we don't do is we don't look at the people, humans that actually consume the food," West says.
"There's an important interface between the production of food and what's in it and the nutrition and health of humans.
"That's why we've teamed up with the Liggins Institute because they are basically human or medical scientists." There has not been enough collaboration between livestock animal and medical scientists in New Zealand, he says.
"When you get that boundary issue between science that's often when you make some of your most exciting discoveries."
AgResearch plans to create a $6 million dairy research institute and development farm in the Waikato where agri-technology companies can trial and develop equipment and has also made a proposal to the Government for a pastoral foods research and development centre for dairy and red meat at Ruakura.
The two developments would link up so that differentiated high-value milk produced behind the farm gate could be taken to the centre for extraction of various compounds or to make food ingredients.
"What we're really trying to do is create a world class cluster in the Waikato around agri-technology companies," West says.
The global food crisis is putting agriculture in the spotlight and science is the key to meeting the demand for food, West says.
The solution could include genetic modification.
"I think it's certainly going to be required for forages because I just think it's going to give us the ability to have less impact on the environment on the one hand and on the other I think it will give us the capacity to handle some of the changing climatic conditions."
Attributes could include greater tolerance to drought.
"Whether you need genetically modified animals is a different question. The case for that at this stage is less obvious."
Transgenic animals are used in the production of human therapeutics but the animals are not consumed.
West says if the case for environmental, social and individual benefits of genetic modification is made, the public would come round.
FAIR VALUE?
The steep reduction in Fonterra's fair-value share has surprised and upset some farmers and investors.
Fonterra last month set the fair-value share - bought by farmers based on the amount of milksolids they supply - for the coming season at $5.57, which is an 18 per cent drop on the previous season's $6.79 and comes after an interim valuation was made in December at an increased level of $7.01 a share.
NZX-listed Dairy Equity was set up to give shareholders exposure to the dairy market by buying the beneficial ownership of fair-value shares held by farmers, with the rights to the value-added portion and the capital returns from any change in value.
Dairy Equity is being wound up with farmers having shown less inclination to sell their shares than had been hoped and it has already returned $22.9 million to investors.
The drop in Fonterra's fair-value share does not affect plans to return $6.1 million in August, which can proceed because farmers had settled the repurchase of beneficial ownership at previously agreed prices.
However, Dairy Equity's remaining 2.3 million shares have a value of $12.55 million and the firm has net tangible assets of about 44c a share.
Dairy Equity believes it will achieve a better result for its remaining shares by delaying a sales initiative until there is guidance from Fonterra on the value-added component it expects to pay in the coming season.
Dairy Equity acting chairman Phil Lough anticipates shareholders will eventually get back close to the amount they originally invested and earn a dividend.
The drop in the fair-value share price will have done little to help confidence in Fonterra given it was significant, came without warning and was against previous advice to the market, Lough says.
"The fair-value share price drop was especially surprising in that it came just six months after Fonterra announced an interim share price for 2008/09 of $7.01 per share," he says.
"Many farmers, including those who repurchased SWAP shares from [Dairy Equity], made decisions to buy, sell, redeem shares based on this price guidance from Fonterra and are now significantly out of pocket."
Meanwhile, a possible class action being investigated by Dunedin law firm Rodgers Law is raising interest.
The action could cover farmers who had decided to sell shares and believed they may have received misleading information from Fonterra.
Southland dairy farmer Greg Roberts says he decided to sell his farm, spoke to a Fonterra representative about cashing in his shares and was advised to take the June price because the shares were going up.
Rodgers Law partner Steve Rodgers says the possible class action is still being investigated.
"We've had a lot of people get in touch and other law firms actually have got in touch with us as well with their clients," Rodgers says, "so there's certainly interest."
Fonterra has said farmers were enjoying record returns as suppliers and the fall in share price was disappointing, but it had been hit by unstable global financial markets, high commodity prices cutting into ingredients margins and the higher milk price.
The $5.57 fair-value share for 2008/09 was set 11c below the mid-point of a range by independent valuer Duff & Phelps of between $5.26 to $6.11 a share to reflect a one-off net cost of redeeming dry shares due to the drought.
The forecast payout to farmers is $7.90 a kilogram of milksolids, compared to $4.46 the previous season, with the initial forecast for the new season at $7.
The drought meant most farmer shareholders would hold excess shares which could be surrendered at the pre-reduction price of $6.79 a share.
Farmers planning to return to previous production levels would be able to buy back in at the lower price, taking the $1.22 a share difference.
NEW FEDS BOSS
Federated Farmers has appointed Conor English as chief executive.
English was commercial director of The Property Group consultancy and is a former chief executive of the New Zealand Property Institute.
Federated Farmers president Charlie Pedersen says English started his career as a sheep, cattle, crop and forestry farmer.
"He has a very good understanding of the role and goals of Federated Farmers and already has established relationships with many of our stakeholders," Pedersen says.
English says it is an exciting time.
"New Zealand grows grass to feed the world and there are plenty of challenges to ensure we continue to do that successfully," he says.
Conor English is the brother of National deputy leader Bill English.
