Victorian-based milk processing giant, Murray Goulburn, may have its first NSW-based farmer director by the end of this month.
The former chairman of rival Lion’s major supplier group Dairy Farmers Milk Co-operative, Ian Zandstra, is one of six candidates vying for positions on MG’s recently slimmed-down and revitalised board.
The nominees, which also include a former banker turned dairy farmer, a commodities market trader and a New Zealand accountant who migrated to farm in northern Victoria, are contesting the big co-operative’s two vacant northern region seats on the board.
Struggling MG’s status as a farmer co-op has become a key election discussion, particularly as candidates voice thoughts on issues relating to the company’s unit trust, which listed in 2015 to raise $500 million from a new class of outside shareholders.
Profit sharing dilemma
Severing the controversial profit sharing link between milk payments to suppliers and the unit trust’s dividends has been one of the hot pre-poll topics.
The trust owns about 40 per cent of the co-op business, but has no say in the company’s management.
MG’s board previously had three directors representing northern Victoria and NSW but only two seats are now available because the board has been downsized from nine to seven seats.
Former directors Graham Munzel and Ken Jones reached their mandatory service limits, while Natalie Akers opted not to recontest her seat.
Mr Zandstra, who owns dairy farms on the NSW South Coast at Pyree near Nowra (milking 900 cows with a share farmer) has been a MG supplier for seven years since he and wife, Cheryl, bought a second farm in Victoria’s Goulburn Valley (recently leased).
He was also a director on the big NSW-based Dairy Farmers co-op from 1998 prior to its 2008 sale to National Foods (now Lion).
From 2004 until late 2013 he led the national farmer co-operative supplying milk to Lion from farms in Queensland, NSW, Victoria and South Australia.
His time at the helm included a succession of particularly testing years for farmers as major processors, including Lion, screwed down farmgate payments and consolidated processing activities.
I’m standing because I have experience – it's one thing that you can't get for nothing
Those tough years set the scene for a flood of Lion’s NSW suppliers to join MG when in 2013 it announced plans to build a milk processing plant in Sydney and expand its domestic consumer market.
Although part of the board which sold Dairy Farmers, Mr Zandstra has been a staunch believer in the success of the co-operative model and felt his co-op experience could be an asset to MG’s board under new chairman John Spark and and new managing director, Ari Mervis.
Both new bosses arrived early this year to swiftly begin a re-think of the financially battered co-op’s management and business activities.
Three factories are now being closed.
Mr Zandstra said he was not standing for election as a voice for northern suppliers based in NSW.
“I’m standing because I have experience – it's one thing you can't get for nothing,” he said.
MG also clearly needed to focus on board level governance, rebuilding trust and better communication priorities with its farmer members.
“MG has had a governance crisis – a crisis of decision-making, a crisis of failing to be on watch,” he said, referring to the company’s optimistic sharemarket promises, followed by last year’s farmgate milk price collapse, then a retrospective payment clawback from its devastated suppliers.
“It’s all history now, but the 2017 annual results are about to come out and we’ll see what has been able to be recovered in the short-term.
“Unfortunately, it will not be a short recovery process.”
The company’s challenge was now to identify the best structure for a co-operative like MG, especially now relationships with its suppliers, the new shareholders, and the performance and balance sheet had changed.
“MG has to be returned to delivering a leading price to its farmers and to service shareholder capital,” he said.
Although the co-op’s partial listing in 2015 had put “a new train on the track”, he felt the profit sharing mechanism had to go.
“The restructure of 2015 has to be revisited, although it’s now a very complex issue.”
Confidence in co-ops
He said New Zealand super dairy co-op Fonterra and multiple big farmer co-operatives in Europe and North America had proven the publicly listed option was not the only one.
“I believe a co-op model is as good as any other commercial operation, but in the dairy industry it comes down to supporting as many members as you can with the best possible milk price in the market.
“MG will certainly need to build that farmer support because it certainly can’t go back to the stock market for more capital after all that’s happened last year.”
The other five candidates, all Victorians are Ian Goodin, who milks 400 cows at Yarroweyah, Paul Mundy, who has a 300-cow herd at Cobram East, dairy advisor, David Paton; Russell Robins, Cohuna and Brock Williams, Torrumbarry.
The ballot closes on August 23.