Why it’s important that Pā mu thrives
The struggling SOE could first explain its major hurdles, writes
Landcorp (trading as Pāmu) has been in the news again for the wrong reasons — performance is not at the standard expected from a State Owned Enterprise (SOE).
SOE Minister Paul Goldsmith, who recently met with Pāmu and told the executive he was unhappy with the company’s performance, has ruled out an immediate sale. This is just as well for all other landowners.
A mere hint of 360,000 hectares of sheep, beef, dairy and deer farms coming on to the market at once would be enough to send land prices into a dismal spiral.
There are good managers on the SOE farms, and there are many people trying to do good work.
In addition, there are the Wellington-based people trying to work with the Government and set up systems to enable all farmers.
There are also staff focused on compliance paperwork, ensuring that the organisation is managed within national and regional legislation and that processor requirements are being met.
Throughout the organisation, people are coming up with what they hope are good ideas and then putting them into practice.
In many cases, they are trying to show the way to the future — taking the risk and testing the outcomes.
Some are saying that even with economies of scale and top brains, in this environment of costs of production and poor returns, economic viability is marginal.
Without economies of scale, more and more farmers are struggling.
If the State Owned Enterprise Landcorp can’t show positive returns of the type expected by shareholding ministers under current legislation and returns, how can normal farmers survive?
How can they provide for their families and staff while looking after the environment and maintaining their businesses?
Landcorp has tried everything that has been suggested, including creating the brand name Pāmu, as it says on its website, “not just for its literal meaning ‘to farm’ but also to reflect the Māori concept of guardianship of the environment (kaitiakitanga)”.
Environment was a feature of
Steven Carden’s tenure as chief executive, with the creation of an environmental reference group and then a “Head of Environment’ position in 2018.
A year later the more environmental approach was being shown as reducing cow numbers in sensitive areas (Canterbury Plains and Taupō , for instance), embracing sheep milking and moving some farms to organic systems while reducing imported feed.
By that time, red deer had been milked for a year — a pioneering move creating a product that, given the cost ($143.75 for a 420g pack of powder) might find its niche in cosmetics.
Innovation is clear in the State Owned Enterprise mindset.
So is value chain creation.
The change in thinking towards value chain featured in 2017 when chair Traci Houpapa and chief executive Steven Carden said the company was now in the fourth year of transformation.
From the foundation of traditional commodity-producing agriculture, the company was moving into a business focused on natural foods, nutrition products and fibre of the quality and provenance valued by millions of consumers.
Overall, the company expected to be farming fewer animals in future and to have a stronger focus on plantbased products for food and nutrition.
Honey was mentioned, as well as the organic, sheep and deer milk components already mentioned.
But since the announcement, honey has floundered.
Sheep milk in at least some companies is in trouble, and there is no heading for plant-based on the Pāmu website.
Further, in mid-November last year, then State Owned Enterprises Minister Minister Duncan Webb (Labour) wrote to the Landcorp board requiring that it focus on its core business and commercial disciplines.
The board was also asked to detail steps to improve the performance of its off-farm ventures.
In short, it was told to concentrate on its knitting.
Dr Webb’s letter included: “We ask that you consider shareholders’ expectations and best farming practices, including prioritising on-farm performance and operating as a commercially disciplined exemplary pastoral farmer.”
He also set expectations for a normal business — protect the environment, the animals and the staff, enhance the enterprise, address underperformance and return a dividend to shareholders.
Succinctly, the minister expected “Pāmu to be a commercially sustainable pastoral farming business and as profitable and efficient as comparable businesses not owned by the Crown”.
Overall, it probably was. The Minister thought it wasn’t good enough — farmers feel the same about their businesses.
While difficulties with markets, cyclones, droughts and interest rates can be cited by all producers and growers, Landcorp is in a prime position to quantify the added cost of compliance.
Smaller farmers do the paperwork themselves and have been telling Prime Minister Christopher Luxon that 30 per cent of their time is spent filling forms — and that time is after the day’s farming work.
Landcorp employs people to do that work. What is the cost? And what is the opportunity cost of money to compliance consultants rather than development and environment?
The current government has promised an enabling environment for business.
Landcorp could assist by pointing out the hurdles that detract from progress.
If the State Owned Enterprise Landcorp can’t show positive returns of the type expected by shareholding ministers under current legislation and returns, how can normal farmers survive?