Monday, 21 December 2015

Competition is good for all


We stand for challenging the status quo when it comes to fertiliser pricing and rebates.

Since Greg Campbell started as CEO three years ago, there’s been an increased focus on improving financial returns. The question in the current climate is: How best to return benefits to shareholders? Our customers are telling us that they would prefer competitive pricing, money in their pocket, all-year value and a sensible annual rebate.

When rebates can distort pricing

Delivering all-year value, rather than a one-off rebate is a topic we are passionate about. If you get to the end of a year and you've been squirrelling margin away for 12 months in order to return an excessive rebate, then you shouldn't be congratulated for returning your owners’ money back to them. In that scenario, you've been setting your prices too high throughout the year. If that money is not needed by the co-operative for vital investment, then we believe it is better off in the shareholders’ pocket.

This was the thinking behind our spring superphosphate price cap that saw a web-listed price difference of $7 per tonne between the only two manufacturers in New Zealand. For a large dairy farmer in the grip of a pay-out downturn struggling to manage cash-flow, this price difference can mean thousands of dollars staying in their bank account. The farmers that came to us because of our cap said that is a lot more useful to them right now than a rebate cheque next year.

Delivering an appropriate return on capital across the long-term is more important than fixating on rebate.

Of course, we will look to pay a competitive rebate next year, but measuring a true co-operative by its rebate alone gives a distorted picture.

Science and advice is essential

Price and quality of products are only two ways to deliver all-year value. These days, astute and science-savvy farmers rightly expect well-trained people using smart innovative tools to help them achieve their goals.

For example, we have the most certified nutrient management advisors of any company in New Zealand and, driven by the speed of changes in fertiliser science and nutrient regulations, they are on a constant programme of re-training to keep up to date.

That’s hugely important in areas that are especially sensitive to nitrogen application rates and the potential for run-off. Old technology only told the farmer that fertiliser was applied; it might even have told them roughly where it was applied. Predictive nutrient budgets and new spreading systems can work out how much to put and where to put it – to an accuracy of 20cm. They can vary that application so areas that don’t need as much fertiliser get less, those areas that need more get more, and sensitive areas can be avoided.

Because we invest in the laboratory, the stores, several spreading ventures as well as the map-and-measure technology, all the vital information can be efficiently integrated using the latest technology and qualified staff.

Close enough isn’t good enough

The data from the soil tests, fertiliser plans, spreading records and growth-tracking data from devices like the Pasture Meter from C-DAX are integrated into one easy-to-use auditable map.

Gone are the days when putting the same amount of fertiliser over the whole property and averaging out the benefits is OK for farmers. Farmers need to know that there is advanced science, a high level of accuracy and good data behind every tonne of fertiliser that goes on to their land. The pasture production responses are proven and there’s no snake oil claims or puffery.

We have agchem and seeds products to boost feed quality and quantity, and animal health products to drive livestock’s wellbeing and productivity. But these are only as good as the advice and insight that accompanies them.

Great relationships are the key

I might not be impartial, but I believe we can develop stronger relationships as we don’t have middlemen in the way.

This is an approach that keeps us customer-focused, upfront and transparent. Having a trusted team that’s approachable is the essence of a true co-operative. There’s no place to hide if things go wrong, but it also means that our customers are dealing with the people and the buck stops with them.

By the time the upswing in dairy payouts comes, the rural sector will have shown its resilience and adaptability. There’s a saying about never letting a good crisis go to waste and that is about looking at all aspects of the status quo and questioning whether things can be done better. After dairy farmers have evaluated their nutrient management set-up, we’re confident that we can earn that call or visit up the driveway.