Farmlands Grain (N.Z.) Society Ltd : a marketing audit, 1980-84

Abstract

On July 31, 1985, Farmlands Grain New Zealand Society Ltd engaged the Agricultural Economics Research Unit at Lincoln College to conduct an audit of the marketing and administrative performance of the Society for the four pool years, 1981-85 inclusive. The AERU was given full access to all records of the Society. Given the growth of the Society, a number of its operational systems are continuing to evolve rapidly. Some suggestions made in this report are already being adopted. Other suggestions and criticisms need to be viewed in the context of this rapidly evolving organisation. It was wise and indeed fortunate to establish the South Island Barley Society Ltd in the Spring of 1980. This buoyant period of world market demand for coarse grains from non traditional sources enabled the Society to establish itself firmly in the market. Since that time, the Society has continued to perform at a very high level in a volatile external operating environment, both at home and overseas. The Society has managed its grain marketing operations energetically with a high degree of effort in export marketing. The Society has established a major new New Zealand export product (Triumph Malting Barley). This achievement may be one of the greatest export marketing efforts of the last five years. The risk management procedures of the Society have been prudent and operated in a measured, systematic fashion. This has resulted in significantly higher pool returns to farmer clients over the four year period 1981-85. There is every indication that the Society can maintain and even enhance its market leadership position in the future. There is of course, room for some improvement in certain areas. The reporting of management and marketing performance to clients (current and potential) is weak. In one sense the high performance level of the Society has been obvious through pool returns but until very recently, little appears to have been done to explain the source of this performance. It is recommended that the Society produce a management report each year to complement the financial reporting system. With the rapid developments in financial markets and policy changes in New Zealand, risk management may require increased attention in the future. Increased attention may need to be devoted to establishing longer term marketing arrangements and early sales in the August-November period. Furthermore, a daily system of monitoring the exposure of each pool (and the Society overall) to price, currency and farm contract risk is required for operational purposes. This comment need not be interpreted as a criticism of past performance because most export enterprises are in the same position in New Zealand as a result of the changed exchange rate policy, the opening of futures markets and the removal of a wide array of financial regulations.