Ten-year Chinese dairy deal risks future, says NZ First

1 April 2019

New Zealand’s third largest political party has warned that the country’s dairy industry could wind up at the end of the supply chain “controlled by a foreign multinational” if the Westland Milk Products co-operative accepts the purchase offer from a Chinese state-owned dairy company.

Yili Industrial Group has offered $588m to purchase the 125-year-old independent co-operative dairy company, which is owned by 429 farmer shareholders.

The board of the group has voted unanimously to accept the bid. However it must be approved by the shareholders, who will vote on the deal in July.

Westland’s board made an appeal for an investor with capital last year - after the heavily in-debt cooperative recognised it had failed to pay its farmers a competitive milk price for several years.

Out of the 26 parties who answered the call, Yili was considered to have offered the best deal – pledging to collect milk from even the most remote suppliers for 10 years. 

However New Zealand First’s industry spokesperson Mark Patterson has urged the Westland Milk board to “consider carefully the consequences of voting in favour of the sale”.

“By selling their co-op for short-term gain they need to be particularly concerned for the more isolated farmers who risk being dropped when the 10-year guaranteed supply period ends,” he said.

Patterson said the party was worried about the continued erosion of New Zealand control of the dairy industry.

He feared there could be “long-term consequences of becoming price-takers at the end of a supply chain controlled by a foreign multinational”.

“As a country we need to get serious about the repercussions of losing control of processing companies for our agricultural exports. The highest margins are closest to the consumer and we can’t capture those profits for New Zealand if we don’t own those value chains,” he said.

However Westland posted a video on YouTube defending the deal. Chairman Pete Morrison said the sale was the best thing for farmer shareholders and the region. “It keeps our co-op together, it means everyone's milk is picked up for 10 years, and they get $3.41 in the pocket,” he said.

Morrison said Yili Industrial Group would own all the shares, but also had a strong commitment to improve the brand and take it into Asia. He added the group already had a proven track record in New Zealand, through its ownership of Oceania Dairy Limited.

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