Fonterra is in a fix but farmers should beware of what happens when the Govt steps in …


Govt won’t fix Fonterra’s problems” – so ran  the  strapline  on  the  NZ Herald’s  weekly  “The Business”  last  Friday.

And  thousands   of  Fonterra’s  farmer-suppliers,  reading  the  article which quoted Agriculture Minister Damien  O’Connor,  almost  certainly would have sighed  with relief.

Who  would want   this   government  to  “fix”  their  industry?  Look what happened to  the   oil and  gas  exploration industry  after  Energy Resources  Minister   Megan Woods  applied  her  “fix”  to  it.

Or  what’s happening  to the   trucking  industry  after  Transport Minister  Phil Twyford   applied his  “fix”  to  the  fuel taxes.       

The  dairy  industry   is  already  only too  familiar   with  government  “fixes”  as  the  Ministry of  Primary Industries   tries to  rid  the  country of  Mycoplasma bovis   (while  blaming  errant  farmers for  its  introduction, at  the same  time  playing down  any   fault  on the  part of Biosecurity).

So  Fonterra  will just have to soldier on  without O’Connor  and his officials  moving  in   to  offer  solutions  to Fonterra’s problems.

O’Connor  accuses   the  industry  of  “having  done a  lot of silly things over the years and at   times lost sight of the  fact they need to  retain a  social  licence”.

Some  cow  cockies   might  have   shouted  back:  “What about  the  $14 billion  the  industry  earns  on  export markets?”.

O’Connor argues that Fonterra’s  owner-suppliers need to  consider constitutional  issues  very carefully  along with  any  changes to  Dairy Industry Restructuring Act, the  2001 legislation  governing  the industry.

The Act is  currently  under  review   and a   discussion  paper  is  in preparation.

The  fundamental  flaw  in the original  legislation (which  the authors intended to  facilitate the  evolution of  higher-earning, value-added product business) was  the  imposition on  Fonterra  of the obligation to  allow  open  entry and open exit  to farmers,  and to supply  milk at the regulated price  to competitors.

That  obligation  meant  the co-op  had to  outlay  vast  capital  sums on, in particular,  milk driers   to  cope  with  seasonal  peak  production, and the rapid   increase in production as  farmers  lifted  the numbers   in their dairy herds.

So,  some   with a  clear  sight  might  argue   Fonterra’s  most acute   structural  problem  stemmed   from  a   government ”fix”  in the first  place.

Please, no more fixes  of that  kind.

Better  news on  another  front:  Fonterra has appointed an independent Sustainability Advisory Panel to guide it as it strives to be a world leader in sustainably produced dairy nutrition.

The panel features a diverse range of experts including:

  • Sir Rob Fenwick (Chair), who co-founded the NZ Business Council for Sustainable Development and was the first New Zealander knighted for services to both business and conservation.
    Paul Gilding, a Fellow at the University of Cambridge’s Institute for Sustainability Leadership, author and former global head of Greenpeace.
    Aroha Mead, a Research Associate specialising in Mātauranga Māori and indigenous knowledge.
    Bridget Coates, Chairperson of White Cloud Dairy Innovation, Director of Tegel Group Holdings Ltd and former Director of the Reserve Bank of New Zealand.
    Hugh Logan, who chaired the Land and Water Forum and has 40 years’ experience in natural resource management.
    Michelle Pye, owner of large scale agricultural business Pye Group and member of the Fonterra Shareholders’ Council.

Fonterra CEO Miles Hurrell says the panel represents one part of the co-op’s wider strategy to build sustainability into everything it does.

 “Some of the world’s biggest sustainability challenges are around food and we believe, like many, that the global food system must shift from being part of the problem to becoming a greater part of the solution. Our co-op is already taking action to support healthy environments and strong communities, but we know we must do more.

The cooperative needs to be mindful of the need to keep up with – even better, to be one one step ahead of – the Government, which announced the next stages of its fix our water problems today.

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