Stephen Ward: Climate cover is not all hot air

At a time when primary sector producers have been facing increased costs, the suggestion of additional compulsory insurance cover for natural disasters may not go down too well on the farm or orchard.

But - on the assumption the threat of an increased number of "adverse events" due to climate change is not just hot air - it might not be a totally stupid idea. The devil will be in the detail.

A Ministry of Agriculture and Forestry discussion paper proposes - among other options - compulsory sector insurance levies or private policies to cover damage to farmers' and growers' currently "uninsurable" on-farm infrastructure. These would be "special recovery measures" in addition to existing systems.

The paper sensibly warns a production-based insurance levy could see low-risk producers subsidise high-risk producers, and notes private insurance compulsion could lead to very high premiums.

But compulsion - as long as it is accompanied by measures to mitigate or forestall such potentially negative consequences - should get serious consideration given the nationwide economic impact of not getting the rural sector back into swift action after significant problems.

While the paper canvases other special recovery options - such as capped direct assistance to farmers from government, cash grants and loans - insurance may provide primary producers with greater longer-term financial certainty. However, the call for a cost-benefit analysis of compulsion is obviously a sensible one.


Dairy's Auckland window

It could add a whole new layer of meaning to the term Queen St farmer.

A programme to attract more bright school leavers into the dairy sector has extended its reach into Auckland for the first time.

About 200 students from colleges in the region attended a Dairy Insight Windows to the Dairying event last week at a south Auckland farm.

Previously such events - designed to give senior students with an interest in dairying a taste of farm life - have been limited to provincial locations.

But former dairy farmer Shaun Wilson of HR company ATR Solutions - which runs the programme for Dairy Insight - says about 25 per cent of inquiries from a dairying recruitment campaign last year came from Auckland. "That gave us a pretty sharp steer" on running one in the region, he says.

Wilson says recruiting more quality school leavers is important in helping the industry achieve its growth targets. "Critical to achieving many of these objectives is the quality of the people."

Farmers need good numeracy and the ability to handle technology. "Even the most simple task - feeding cows -there's a whole lot of science behind it," he says.

Dairying also teaches business and management skills that open up other careers. "The skills of those persons in positions of responsibility in this industry, I would back against any industry."


Brains definitely needed

The brain of a contortionist would certainly help in picking your way through the section of Fonterra's latest annual report outlining the co-op's shift to a new way of helping assess the value-added component of farmer payout.

For example, in a fairly dense section on commodity milk price (CMP), the report notes CMP is based on the cost of milk applied in assessing earnings for the purpose of valuing the co-op's fair value shares.

"The historical CMP simply takes that forward-looking model used for the valuation and applies the actual milk volumes, base commodity prices and exchange rates achieved by Fonterra during the season (hence it is the historical CMP)." It's not exactly material that slots neatly into place in the cranium at first reading.

But to its credit, Fonterra put in a very good effort last week briefing media on the change to a new milk price and related issues.

The co-op has recently received a pasting over its performance from the Fonterra Shareholders Council and last week it faced fresh criticism from farming leaders over its flat payout forecast for this season.

The international dairy business is complex and maintaining a solid degree of clarity and understanding over its operations will be important over the coming year for Fonterra's credibility.

Farmers and media understand the need for commercial confidentiality but want clear and unambiguous information to help them judge performance and assess developments.


Deer dragging

Grabbing the deer by the antlers is proving something of a protracted task for PGG Wrightson and the deer industry's Velconz initiative, which is seeking greater farmer control over export sales of velvet.

Now it seems farmers are to be polled directly by the company about what they want. PGG Wrightson runs a pooling system - a sales "platform" - which handles most of New Zealand's export velvet by selling direct to bidders.

But as New Zealand's production has increased significantly annual returns have fallen - from around $35 million in 2001 to $24 million by 2005.

And Velconz has suggested that a farmer-controlled entity oversee sales and marketing in a bid to earn more for their product. Discussions had been going on for several months, with PGG Wrightson proposing it and Velconz control the pool together.

But Velconz working party member Stu Nattrass, who also sits on Fonterra's board, says: "Velconz's preferred outcome would be that the producers would own Velconz [and] would own the pool, and PGG Wrightson would be a service provider."

He says there is frustration at the time being taken to sort things out.

"It seems, from my perspective, it's not a difficult concept to grasp that ... you've got to move away from just a selling platform to something that can market a product."

PGG Wrightson's chief operating officer Hugh Martyn says the next step is to poll suppliers to see what they want.

"The bottom line is that velvet prices are poor and we're interested in pursuing anything that's got a chance of improving those prices."

No doubt his company will be keen to come to an arrangement that doesn't sideline it too much.