What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
Mayor Roly Ellis says dairying is a major component of the local economy and he's seeing the start of problems arising from the dairy downturn.
Tararua District includes four major rural towns: Dannevirke in the north; and Woodville, Pahiatua and Eketahuna in the south. Fonterra has a big factory at Pahiatua.
The district also has other farming-related businesses in its towns, including agricultural machinery production.
Ellis says the region has about 350 dairy farms, and their cashflow -- and that of the businesses that service them – is a big chunk of the money that circulates in Tararua. But the downturn has changed this.
"Dairy farmers aren't spending huge amounts in shops or the agricultural service businesses. I walk the towns about every three months to find out what's going on and talk to the shopkeepers and agri service businesses," he told Rural News.
"I have been a farmer myself and was a rural drought coordinator here in 2007-2010. I am a trustee to a big farming enterprise and so keep my ear to the ground."
Ellis says he has not so far heard of any dairy farmers forced to sell up, but he and the council are keeping a close watch on what's happening, hence the cap on rates.
What worries Ellis most is the predicament facing sharemilkers, especially lower order ones. They are vulnerable and subject to some of the problems now starting to show up.
"What has happened all over the world -- I have seen this in Britain where I farmed -- is that you go through highs and lows, and during the highs everyone gets wonderful ideas.
"In fact, the dairy farmers haven't had a check like this for years and years and they have suddenly realised they now have to become more efficient. Efficiencies are going to come in, I am absolutely sure of that. People who have been spending liberally until now are suddenly facing this check in what they can do."
Ellis says this has happened in the sheep and beef sector and farmers now better understand where the dollar has to be spent. He's been through this and admits it hurts like hell, but farmers go on to look at different ways of running their businesses.
Ellis says his council is monitoring the dairy downturn.
