Stephen Ward: Middle path tricky in eco/economic debate

How to keep growing our economic cake through more intensive agriculture while continuing to eat the benefits of our "clean, green" environment is a key issue for the primary sector.

The compatibility of the two goals was considered at a major scientific forum in Napier last week. It was organised after Federated Farmers president Charlie Pedersen's recent broadside at environmentalists, in which he castigated them for placing concerns about the environment before national economic wellbeing.

The forum asked: Was there a middle way between environmental groups and farming interests?

Agriculture's effect on water quality via nutrient run-off, its contribution to greenhouse gas emissions, and erosion of deforested hill country farmland are some of the primary sector's well-known environmental concerns. But farmers are, of course, already working to reduce their environmental impacts and restoring the countryside.

And Agriculture Minister Jim Anderton called at the forum for greater co-operation between environmentalists and farmers, warning that green groups risked losing credibility if they didn't give credit where it was due to farmers. But he also suggested some farmers were "in denial" about the environmental impacts of their activities.

It was crucial New Zealand's "clean, green" brand was protected in global markets for agricultural produce, and good water quality was critical for maintaining this country's attractiveness to tourists, Anderton said.

Parliamentary Commissioner for the Environment Morgan Williams suggested interested parties look at how they can build "leadership platforms" as a place to develop consensus about the way ahead. "I have much more faith as the years have gone on in what we can do outside governments - but with government facilitation and support - than I have inside short-term, three-year governments."

Fish & Game NZ director Bryce Johnson wanted to see an agriculture and the environment summit held every three years. Veteran environmentalist Guy Salmon, from the Ecologic Foundation, said experience in other OECD countries was that farmers would over time co-operate more with environmentalists and work with government to further clean up farming practices.

But dairy company Synlait's executive chairman, John Penno - head of the Dairy Environment Review Group - said more intensive land use was inevitable and scientists needed to come up with strategies to assist this in a way that reduced environmental impacts. "Options that suggest that there's not going to be economic drivers in place to drive intensification ... are simply naive."

On the issue of whether genetically modified plants needing less water or chemicals might play a role in our agriculture, Penno believed New Zealanders would be "deluding" themselves if they thought genetic engineering did not have a future here. But Forest & Bird's Kevin Hackwell warned any introduction of GE to New Zealand threatened to "kill the goose that lays the golden egg" if it harmed our clean, green image abroad.

As this and other issues at the forum showed, the middle way here will - as ever - be one of the trickier paths to navigate.


PPCS supplier shares

Leading farmer-owned meat exporter PPCS's idea of issuing up to 45 million new $1 "supplier shares" over three years heralds some potentially interesting developments.

Currently only "rebate shareholders" - who share profits from meat going through a pooling system - have capital locked up in Dunedin-based PPCS.

But PPCS is keen to get the suppliers responsible for the other half of its business to have a share, thereby increasing their loyalty and commitment to the co-op.

A second driver for a supplier share issuer would be to build up PPCS's capital base after the co-op's doubling of turnover in recent years to around $2 billion. Expanding the capital base in this way could also cut costs modestly.

And a capital injection would help position PPCS to take part in rationalisation of the meat processing sector. Stripping costs out of the industry is seen as essential to boosting supplier returns and reducing pressure for them to switch to other types of farming.

PPCS chief operating officer Keith Cooper said extra share capital would help the co-op "participate fully" in rationalisation. "Over the short to medium term something has to be addressed within the cost structure of the industry and all participants need to contribute to that."

One idea that has been floated is a merger of PPCS and fellow meat co-op Alliance. It's been suggested this would cut transport, marketing, procurement and administration costs, much as the creation of Fonterra and PGG Wrightson has done. But there's been scepticism this would add that much to supplier returns. Cooper said PPCS has no merger or acquisition on the table at present. "That doesn't mean to say we won't look at anything and haven't looked at anything." Watch this space.


$40M for RD1 holding

The Overseas Investment Office has revealed Fonterra will receive $40 million from Australian Wheat Board subsidiary Landmark for a half share in rural retail business RD1.

The figure, in an OIO decision giving the deal the green light, is smack in the middle of the $35 million to $45 million payment expected when the deal was announced in May. The final sum was to be based on RD1's contribution to Fonterra's final earnings last season.

On whether the price was right for Fonterra, RD1 chief executive John Lea and a Fonterra spokesman stressed they were very happy with the overall deal, which also has Landmark and RD1 forming a transtasman services-and-supplies alliance targeting the dairy sector.

Lea said the deal was done at "market rates" and that Fonterra would share in profits from a Landmark-Fonterra stores alliance initially targeting 11 outlets in Victoria. And, said Lea, "The ability to grow RD1 at a much more accelerated rate will also add to the value of the business."

In New Zealand, Landmark's extra muscle will help RD1 compete with the likes of PGG Wrightson, Combined Rural Traders and Farmlands. Local dairy farmers will be hoping the deal both keeps their costs down and boosts their income via extra Fonterra profits.