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$37.7 Million Levy On Dairy Industry

19 April 2002

Dairy farmers will pay $37.7 million a year in levies for industry good activities if they vote in favour of introducing an industry levy under the Commodity Levies Act. The vote of all dairy farmers is to take place in May and if successful will form part of an application to the Minister of Agriculture for a levy to replace the funding previously undertaken by the Dairy Board.

In preparation for the vote, the newly established industry good organisation Dairy InSight, who will manage the $37.7 million industry good fund, has published a Statement of Intent, which has been circulated to all dairy farmers.

“We want dairy farmers to know exactly what they are buying with their levy,” says Peter Bodeker, chief executive of Dairy InSight. “It is clearly laid out in the Statement of Intent, and we mean to do what we say.”

The largest portion of the levy, at $17.6 million, will be spent on quality-related activities. This includes disease eradication, bio-security and product safety.

“We have a potentially significant commitment to the Animal Health Board for Tb eradication which is a large part of this cost, and there is also our ongoing programme for EBL eradication,” says Mr Bodeker.

The next two largest areas of expenditure will be farm-focused research and knowledge management, where $6 million and $6.3 million respectively will be spent.

“The success of our industry is built on research and knowledge management. We are the most efficient producer of milk in the world and we will only retain that status by continuing the development of knowledge through science and its application on the farm,” says Mr Bodeker.

An area of new activity will be industry promotion where it is proposed to spend $1.35 million.

“If there has been one constant refrain at the meetings we have held with farmer representatives and rural professionals over the last six months, it has been that we should promote the benefits of the industry to New Zealand and to encourage talented people to consider dairying as a career. Accordingly we have included a provision for promotional activity,” says Peter Bodeker.

Other funding areas include environment (animal health and welfare and on farm research) at $2.8 million, education at $1.8 million and advocacy at $160,000.

Dairy farmers have been paying this money in the past. Previously industry good activities were funded from the Dairy Board payout and carried out by a range of providers. Now they will be funded through a levy and the work will be continued uninterrupted.

Based on predicted milk production, the levy rate per kilograms of milk solid will be 3.4 cents (excl GST) in the first year. It will be collected on milk supplied to a dairy company and every producer pays.

“This means that everyone is investing because everyone benefits from industry good activities. They may not benefit everyone the same all the time, but they build the positive reputation and capability of the industry and that’s an advantage for all farmers,” says Peter Bodeker.

Farmers will also vote on a maximum levy. That is proposed at 4.3 cents per kgMS. The board of Dairy InSight will set the levy rate each year, within the maximum. A rate is set for a season and will not change during that period. The levy applies for six years with a new vote at the end of five years. A maximum set somewhat above expected costs, allows Dairy InSight to have flexibility and respond to unexpected costs, such as a disease outbreak, without having to seek a special vote from farmers.

“Farmers can be assured that we will not make significant moves of the levy rate towards the maximum without clear justification and consultation,” says Peter Bodeker. “Farmers can also be secure in the knowledge that the levy can not rise above the maximum without farmers direct involvement through a ballot.”

Dairy InSight will be managed by a farmer-elected board, with elections due to take place later this year.

Following distribution of the Statement of Intent, Dairy InSight board and staff will be conducting 36 meetings with farmers around the country discussing the document to ensure that it is fully understood, and giving farmers the opportunity to ask questions and make their points.

“This is not just a vote for Dairy InSight, this will be a commitment by farmers to the development and support of their industry. We want farmers to come out and vote for the levy giving us a mandate to move ahead with this programme and achieve the benefits that we all want,” says Peter Bodeker.


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