Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Who Loses Out?

Who Loses Out?

Friday 29 Nov 2002 Gerry Eckhoff Articles -- Rural

The only real potential losers in the ongoing PPCS Richmond battle are shareholder farmers - on both sides.

Distraction from the core business is obvious. PPCS announced an $8 million profit while it's similar-sized neighbour, Alliance, made $24 million.

Justice Young ordered PPCS to forfeit around $10 million of its Richmond shares, directing it to either attempt a full takeover of the remaining 90 percent of Richmond, or lose voting rights on their remaining share. Clearly PPCS has no other option but to attempt the former. The question remaining is what would be the effect of such a takeover.

It isn't too long ago that Alliance was struggling to survive, the weight of the Waitaki freezing works inexorably dragging them - and farmers - down. All meat producers paid for that decision. The schedule was pitched at a low level, to allow Alliance to slowly emerge from its mountainous debt. PPCS's schedule remained very similar to Alliance during that period, despite being in a much better financial position, and there was no obvious differential to either company's supplier shareholders.

Should PPCS receive 90 percent acceptance from Richmond shareholders, however, it will be burdened with substantial debt - as Alliance was with Waitaki. PPCS will be forced to offer their locked-in suppliers a price for lamb and beef they can afford due to their debt equity ratio. The price will become the benchmark throughout New Zealand until PPCS is able to claw its way back to profitability.

The questions then for all meat producers are: is this takeover in the best interest of my long-term future, or in the meat companies' long-term future? Does this takeover lessen or enhance competition? How much confidence can meat producers have in the integrity of major personalities within their industry, given Justice Young's stinging rebuke in his judgement?

If the full takeover proceeds, PPCS' resulting market dominance must be of concern. PPCS and Alliance have both moved to lock in suppliers by the allocation of space during peak demand times. No loyalty, no space. Many farmers, therefore, have no option but to comply. Life would be so much simpler for meat companies if no competition existed. Rural people are well aware of the benefits of strongly competing fertilizer or telecommunications companies - why should the meat industry be any different?

Competition drives success. Innovation and technologies abound where industries strive to remain ahead. It is, therefore, of real concern if a company achieves dominance in the market place. It was not overwhelming competition that brought the apple industry to its knees, but a lack thereof. The meat industry in the south has achieved well, but main players PPCS and Alliance still presuppose that their profitability is more important than the supplies. Both must occur.

The cooperative principal is fine, but choice of processing plant is essential to drive progress. The reason meat growers should be loyal to one company - and only company - must be questioned. When a meat company cooperative makes a large profit, it indicates that its basic schedule was too low in the first place. If this is allowed to continue, the company will never go broke - but the farmer can. Further, is it appropriate for meat producers to have all their eggs in one basket? Their shares in the preferred processing company remain static in value, while the dollar's purchasing power plunges. Investment outside the industry allows for a greater diversity, should the individual so choose. The meat industry should be about innovation, creativity and technology, not market dominance.


For more information visit ACT online at or contact the ACT Parliamentary Office at

© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Claims About The CPTPP

As a Tufts study usefully explained, some of the basic mechanisms of the original TPP (and the CCTPP is not radically different in this respect) would – in practice – contribute to income inequality, by further tilting the existing imbalance between those reliant on profit-taking as a source of income, and those reliant on wages...

Under the original TPP deal, the Tufts team estimated, 5,000 jobs would have been lost across New Zealand. More>>


Growing The Regions: Provincial Growth Fund Open For Business

The new $1 billion per annum Provincial Growth Fund has been officially launched in Gisborne today by Regional Economic Development Minister Shane Jones. ... More>>


22/2: Earthquake Memorial Service In Christchurch

"The theme of this year's service, 'Keeping their dreams alive" helps us look back at all that we've lost with a sense of hope and aspiration for the future,'' says the Mayor. "It also helps us to recall all those who came to our rescue and those who offered support at our time of need and what that meant to us." More>>


Submissions Closing: Mangroves Bill 'Designed To Bypass RMA'

Forest & Bird is releasing emails which show the Mangroves Management Bill is intended to completely override the safeguards of the Resource Management Act (RMA). More>>


EQC Shakeup: Chair Of Earthquake Commission Has Resigned

The Chair of the Earthquake Commission, Sir Maarten Wevers, has resigned following receipt of a letter from Minister Responsible for the Earthquake Commission, Dr Megan Woods expressing her displeasure with the performance of the Commission ... More>>


NZer Of the Year: Gender Pay Equity Activist, Kristine Bartlett – A Brilliant Choice

National Council of Women (NCWNZ) CEO and Gender Equal NZ Spokesperson, Dr Gill Greer says she’s delighted with news that equal pay champion, Kristine Bartlett, has been named New Zealander of the Year . More>>


Perceived Transparency: New Zealand #1 Least Corrupt Public Sector In The World

New Zealand's public sector is ranked the least corrupt in the world, according to Transparency International's 2017 Corruption Perceptions Index (CPI) released globally today. More>>


Reviews: Three-Year Work Programme For Education

The work programme includes the NCEA review, a review of Tomorrow’s Schools, developing a future-focused Education Workforce Strategy, a continuous focus on raising achievement for Māori and Pasifika learners, an action plan for learning support, an early learning strategic plan, a comprehensive review of school property. More>>





Featured InfoPages