Farmers subsidisng NZ consumers

November 29, 2013

The question of why milk isn’t less expensive here when we produce so much is often asked.

What most people don’t know is  the retail price is well below the real cost.

. . . Chief executive Theo Spierings said the downside of strong demand for dairy commodities was increasing pressure on Fonterra’s NZ Milk Products division where profit margin remained under pressure.

To illustrate his point, Spierings said if the division were to pass on to consumers of a two litre bottle of milk in New Zealand the full price paid to farmers for their milk, the retail price would need to increase from $4 to $6 and the co-operative would be facing a media storm.

“And that would not be the worst of it…we would see the volume of dairy consumption in NZ going down very fast.”. . .

Fonterra and ultimately the farmers which supply it are subsidising consumers.

One reason for the higher cost is that we’re no longer low-cost producers.

The traditionally low-cost pasture-based dairying regions, such as New Zealand, have lost their cost advantage as input prices have risen, and now compete on the global market with a similar cost of production to producers with more intensive farming systems, according to a recently-released industry report.

In the report, No longer low-cost milk ‘down under’, agricultural banking specialist Rabobank says global milk production costs have converged between dairy-exporting countries, as the traditionally low-cost milk producers have seen their production costs rise, off the back of volatile global feed prices and the increasing use of feed in traditional pasture-based regions.

Report author, Rabobank director of dairy research, New Zealand and Asia Hayley Moynihan says New Zealand milk producers will need to structure their businesses and production systems to withstand ongoing high price volatility – for both dairy commodity prices and inputs.

Higher costs can be absorbed when the payout is higher but costs rarely drop quickly when the payout falls.

Ms Moynihan says lower-cost regions, like New Zealand, have already “largely capitalised their efficiency gains in a high milk-price environment into the price of land and other assets”.

Therefore there is a need to adapt to this loss of absolute competitive advantage in milk production as efficiency gains become more difficult to obtain.

“It is likely that optimal supply chain efficiency could at least partially mitigate this loss,” she says.

“Efficiencies achieved downstream in milk processing and marketing via a strong route to market and established supply chain relationships will likely play a greater role in differentiating competitive export companies and industries into the future.”

Ms Moynihan says to ensure that competitiveness is based on more than just the cost of producing milk, the New Zealand dairy industry will need to work hard to ensure that it stays ahead of the pack in supply chain efficiency, market access, marketing and sensible regulation. . .

We also have to safeguard our reputation for high quality, safe food.

The New Zealand dairy industry, most well-known for its low-cost production, has moved, perhaps irrevocably, to a higher cost farming system, the Rabobank report says.

Ms Moynihan says the structural increase in milk prices globally and locally has driven the quest for increased production, almost at any cost.

“The first signs were there in 2002 when , on the back of milk prices increasing 42 per cent over two seasons, farm working expenses surged 33 per cent per kilogramme of milk solids produced,” she says.

“The reality check of a 32 per cent lower milk price in 2003, which remained at a similar level over subsequent years soon saw expenses fall back into line.”

However, Ms Moynihan says the 72 per cent lift in milk prices in 2007/08, and higher prices on average in the years following, brought a steep increase in production costs Media Release November 27, 2013

that show little sign of abating without a significant change in farming systems or an economic crisis.

Farm working expenses increased 72 per cent in 2007/08 on the prior season and interest cost rose 29 per cent with both expenditure categories oscillating around these higher levels ever since, she says.

Additionally, higher interest costs per kgMS have been driven by New Zealand dairy farmers’ increased debt, not higher interest rates, Ms Moynihan says.

“The significant increase in dairy land values over the past decade combined with an increased focus on land acquisition resulted in aggregate farm debt across the dairy industry more than doubling since 2002 to almost NZD 20 per kgMS produced,” she says.

New Zealand producers are likely to experience upward pressure on milk production costs over the coming years as they are confronted by a rising interest rate market and the likely impact of future environmental regulations on farming systems and milk production levels.

“Tackling environmental issues is likely to result in a variety of measures that may include increased infrastructure on-farm, altering pasture management or decreased intensity of farming systems which all impact production cost dynamics”.

Ms Moynihan says milk producers in New Zealand should consider where the competitive advantage lies for their own operations.

“Increased exposure to the global dairy market for some milk producers and greater intensification on-farm for others has added complexity to many dairy farm businesses,” she says.

“A flexible production system at a higher average cost may still be competitive if it provides resilience during a downturn.”

With high volatility expected to continue for both milk prices and production costs, the ability to lower inputs and/or costs during periods of abundant global supply would be a distinct advantage, Ms Moynihan says.

“Southern Hemisphere producers previously survived global market downturns for prolonged periods due to the size of their absolute comparative cost advantage,” she says.

“With this cost advantage now minimal to non-existent, other strategies to survive the inevitable downturns – albeit likely short-term – will be required.”

Any dairy farmer not doing well with this season’s forecast record payout shouldn’t be in the business.

But next season’s payout will almost certainly be lower and even the best farmers have to keep a rein on costs to ensure they can cope with less money.

Businesses which service and supply farms also have to be aware that while they might be making hay under this year’s sun, next season could be cloudier.


Fonterra must lift game – Spierings

November 28, 2013

Fonterra chief executive Theo Spierings said this will be a record season but the company must lift its game:

An optimistic Spierings told the meeting in Edendale he expected it would be an “outstanding year” for the corporation, farmers and shareholders.

He estimated 2.5 to 3 per cent growth.

The forecast cash payout for 2013-14 has been worked out as a farmgate milk price of $8.30 per kilogram of milksolids, with an estimated dividend of 32 cents per share, to give farmers a record payout of $8.62.

Speaking about the botulism scare which hit the co-op earlier this year, Spierings said Fonterra was now in rebuild mode and in a good space with local authorities and customers.

He said Fonterra was not walking away from the event and had to lift its game in food supply quality and sustainability.

Farmers wanted to see Fonterra learn from the scare, translate this into actions and come out stronger, he said.

His promise to farmers was that Fonterra would learn and lift its standards. . .

The company let itself, its customers, its shareholders and the country down.

It must implement all the recommendations in the report on the incident to ensure it does everything to prevent a repeat of that incident and that it is far better prepared for any future problems.

Spierings said there were areas Fonterra “must do better” and work was under way.

“Going forward, when we want to grow dairy, we will need to do it in a sustainable way.” This was not just “on farm” but included factory and logistics.

Fonterra wanted to look forwards and had a 10-year growth plan, which it had presented to the Government.

Southland, one of the four pillars of the New Zealand dairy sector, was still growing in farm conversions and cow numbers.

However, the game had to shift from just adding animals and become more sustainable, he said.

Southland farmers were looking for solutions in sustainability, environment and winter milk.

“But there are definitely issues they still want to discuss with us.”

With regard to sustainability solutions, it would not be a one size fits all – Fonterra would look at each farm individually, he said.

Sustainability in the entire supply chain was the key to securing further international growth and Fonterra now had a strategic plan for this.

Spierings spoke about Parliamentary Commissioner Dr Jan Wright’s Water quality in New Zealand report released last week.

He said the report was “in the past and looking backwards”.

It looked at samples and situations which Fonterra had already said a few years ago were not good enough and had started to fence waterways.

But last week Dr Wright said the report, based on satellite images from 2008, included current best practices.

Spierings said Fonterra farmers had now fenced 20,400 kilometres of waterways – about 90 per cent.

The final 10 per cent, mostly in hilly terrain, would be done because such fencing was part of the Fonterra supply contract.

He said Fonterra would consider doing its own scientific water research project.

Dairy’s reputation isn’t good.

Too often discussion of it is prefaced with the word dirty.

Some of that is based on perception rather than reality.

Big improvements have been made – in attitude and practice  – but there are areas of concern which still need to be addressed.

Fonterra  must do all it can to ensure it and its farmers are operating in a sustainable way.


NZ a decade behind Europe on sustainability – Spierings

November 9, 2013

New Zealand dairying leads the world?

We’d like to think so and in many ways it does, but Fonterra chief executive Theo Spierings says when it comes to social and environmental sustainability we’re a decade behind Europe.

. . . “Fonterra is really eight to 10 years behind the pack for sustainability and CSR (corporate social responsibility),” he told the lunchtime meeting of the Trans Tasman Business Circle. “If you expect sustainability anywhere in the world, it’s here. It’s Brand New Zealand.”

Yet this year’s annual report was the first to devote significant space to reporting Fonterra’s progress.

Part of the problem had not been a lack of initiatives, but too many initiatives that were little more than charitable donations and were pursued without focus on the company’s strategic needs.

For that reason, Fonterra was now concentrating its efforts in the Milk in Schools effort, partly because Spierings said he found the fact some 27 percent of New Zealand children had no milk before lunch “devastating.”

“If that remains the case, I don’t think they will be milk consumers when they are 20 or 25” years old, he said. “We are investing in our consumers 10 years from now.”

Meanwhile, the company was throwing its weight behind efforts to clean up New Zealand’s fresh waterways, recognising clean water as a fundamental part of Fonterra’s claims to high quality products.

“If the water’s not protected, we have no future,” he said.

The two programmes were linked by having farmers deliver milk to schools and children visit farms to plant streambeds and wetlands to help control farm runoff into waterways.

Fonterra was “better to do three to four massive commitments than 40 different things.”

Focus is important and its not just with the public. Fonterra and DairyNZ are both doing a lot more with farmers to ensure on-farm practices are sustainable.

Asked to comment on the potential for a change of government at next year’s election and the wavering support in the Labour Party for the Trans Pacific Partnership free trade agreement, Spierings said he expected Opposition parties to say one thing to get votes and another “when they really have to run the country.”

“You see that in Labour, certain messages,” he said. “TPP, what does it practically mean? What happens to our IP (intellectual property)?”

In government, they knew their primary responsibility was to deliver economic growth.

I’m not sure I share his confidence in the Opposition, especially if it’s Labour and Green both of whom are much better at redistribution than growth.

Of Fonterra’s handling of the false botulism scare, Spierings said the company had learnt a lot about “how layered and difficult sometimes we are.”

An issue which began with a torch lens being lost in processing had also seen a cascade of poor decisions, including that he should have been informed back in May when the cooperative’s food safety scientists decided they needed to test for a bacterium strain capable of causing botulism.

It was a straightforward “yes” or “no” question for management as to whether testing for botulism was a serious issue requiring escalation to the chief executive’s suite. Fonterra had since established a whistleblower’s hotline for staff to report any qualms about food safety straight to the food safety unit.

Even before that, management at the plant where the torch lens was lost should have ensured the reprocessed whey protein powder in question was kept out of the production chain for use in infant formula.

“If it had gone to animal feeds, the Delta (cost to the company) in money was hardly anything, but we could have avoided the whole crisis.”

Any contaminated milk in dairy sheds has to be clearly identified and dealt with properly, it’s equally as important to it do that way further down the production line.

Spierings said one of the unexpected aspects of Fonterra was its disproportionate significance to the national economy and therefore the amount of political and public scrutiny it attracted.

However, he made no apology for calling politicians and journalists out for overstating issues for public impact.

“I understand their perspective, but they should understand that I am not accepting it, that you have to take a responsible approach. By now in Wellington, they know I will react.”

Of Chinese perceptions about Fonterra since the botulism scare, he said some 45 percent of consumers were aware it was a false alarm and appreciated a level of honesty they would not expect from Chinese firms.

However, the other 55 percent only knew there’d been a problem. Fonterra had gone ahead with a cautious launch of its Anmum formula in China in September and although it was early days, Spierings was optimistic it would be well-received and that the cooperative’s model for roll-out was “even better” than a similar venture in 2008 for his previous employer.

Fonterra, and the other companies caught in the fallout have a lot of work to do to rebuild consumer confidence.

This is a refreshingly honest approach from Spierings which shareholders should absorb .

I was appalled to read (in the print edition of the NBR) that a survey showed farmers generally thought Fonterra handled the botulism scare well.

It didn’t and shareholders have to realise that the company isn’t regarded nearly as highly from the outside as it is from the inside.

It does a lot of things very well, but there is room for continuous improvement in others which were identified in the report on the report on the botulism saga.

#gigatownoamaru is continuously improving its ranking in the race to be the Southern Hemisphere’s first gigatown.


Rural round-up

October 22, 2013

SFO confirms preliminary Zespri investigation:

 (BusinessDesk) – The Serious Fraud Office has confirmed it’s looking at legislated export marketing monopolist Zespri International, though is being tight-lipped on any further details.

The white-collar crime investigator has opened a preliminary investigation, but won’t say what it’s looking at or indicating what powers the SFO has to compel Zespri to release information.

“Zespri has not been contacted by the Serious Fraud Office and has no details of the scope or substance of an investigation,” it said in an emailed statement. “Zespri will cooperate with any investigation the Serious Fraud Office may undertake.”

Kiwi Kids Lap Up Fonterra Milk for Schools:

The numbers are in – more than 1000 schools around New Zealand are now enjoying the taste of dairy every school day thanks to Fonterra’s Milk for Schools.

From Southland to Northland, the programme has moved full steam ahead rolling out in eleven regions and reached Auckland today.

Fonterra Chief Executive Officer, Theo Spierings, said over the past five months there has been significant community support for the national rollout.

“Milk is one of the most nutritious foods there is and we want to do what we can to make sure Kiwi kids grow up drinking it every day,” said Mr Spierings. . .

Fonterra investigated over creating lake of buttermilk -

The Waikato Regional Council is looking into the dumping of a milk by-product near Taupo by dairy giant Fonterra.

An unknown quantity of buttermilk has been disposed into a lake for storage at an Atiamuri farm, as the dairy giant struggles to keep up with record milk production.

Waikato Regional Council spokesman Rob Dragten says the council is looking into issues around authorisation, but says there’s no immediate threat to the environment. . .

New kids on the block take out Rural Women NZ Journalism Award:

The joint winners of this year’s Rural Women NZ Journalism award are Sarah Perriam and Tony Glynn of Rural Media.

The Rural Women award was one of twelve awards for rural journalism and photography presented at the Guild of Agricultural Journalists’ annual dinner in Wellington on Friday evening.

“Our award sets out to encourage journalism that recognises the important contribution women make either to the farming sector or to rural communities,” says Rural Women NZ national president, Liz Evans. “We congratulate Sarah and Tony, who are offering a fresh approach to producing and sharing stories about rural life, through video as well as broadcast TV.”

Sarah Perriam works on the production side, while Tony Glynn directs, acts and presents programmes for Rural Media, under its Rural TV banner. Their aim is to make rural folk ‘way more famous’. . .

Farmax offers farmers the power of bespoke pasture growth forecasts:

Farmax is the first company to offer sheep, beef and dairy farmers the ability to harness the power of the industry’s newly launched Pasture Growth Forecaster database at a more detailed level.

Farmax has launched a service called My Forecast where farmers provide the address of their property to get customised short-, medium- and long-term pasture growth forecasts specific to their own farming operation.

Farmax General Manager, Gavin McEwen said “To maximise pasture usage, farmers not only require accurate measures of current pasture cover, they also need accurate forecasts. Farmax’s My Forecast service is a powerful tool for assisting with feed planning and budgeting decisions.” . . .

 Farming for the Future….NZ is not supporting Innovation by Leading Farmers – Pasture to Profit:

 Craige & Roz MacKenzie, are the Canterbury Farm Environment Award winners 2013. Very deserving winners….Congratulations.
The MacKenzie family (including daughter Jemma) are one of the most innovative, creative, Push-The-Boundaries, Farm & Research businesses I’ve ever seen. 
 
GreenvalePastures Ltd Facebook page
Andy MacFarlane (MacFarlane Rural Business) last week chaired a very successful Ballance Farm Environment Award fieldday at Greenvale Pastures farm near Methven in Canterbury, New Zealand.
 Ballance Farm Environment Awards. The Regional Winners . . .
Rotorua to host International Forest Safety Summit on 26 & 27th November:

The past 12 months has seen forestry in the media spotlight to two main reasons – both good and bad. Since the global financial crisis hit, forest products exports, led by log exports, have proven once again to be counter-cyclical. While other industries have suffered, forest production has soared to record levels. With the record high log out-turn, from both the small and large forests up and down the country, has come a tragic toll in worker deaths. Heightened awareness driven by the Pike River mine disaster has brought a change in public attitudes to workplace risks. Safety improvement is now top-of-mind for everyone in the forest industry. While serious harm accident numbers and deaths remain much higher in farming than forestry, it is the public perception of workplace risk, underpinned by an well-funded union media campaign of self-interest, that has changed a lot of attitudes towards people working in the bush.

These combined issues have resulted in a focus by the key players in the New Zealand forest industry to drive an in-depth review of forest workplace safety. . .

Leisure and adventure tourism growth spurs backpacker lodge sale:

Capitalising on the growth of tourists’ passion for eco’ tourism, the Tailor-Made-Tekapo Backpackers is on the market for sale

The opening of two major new tourist attractions and the growing popularity of deep space star-gazing are being seen by a long-time South Island tourism operator as the ideal catalyst to retire from the business.

The Alps 2 Ocean Cycle Trail which opened earlier this year in the Central South Island; the Tekapo Springs thermal resort, ice skating rink and snow park which opened in 2012; and Earth and Sky tours at Mt John Observatory, are jointly forecast to substantially increase visitor numbers to the Central South Island region.

The cycle trail is a 300 kilometre four-six day ride from Aoraki Mount Cook to Oamaru via the townships of Twizel, Omarama, Kurow and Lake Pukaki. . .


Rural round-up

October 19, 2013

Pengxin, Synlait founders make $85.7 mln offer to take over Synlait Farms - Paul McBeth:

(BusinessDesk) – Shanghai Pengxin, which bought the Crafar family farms in a controversial deal last year, and the Synlait founders are offering $85.7 million to buy South Island dairy farmer Synlait Farms.

SFL Holdings, a joint venture between Pengxin and Synlait Farms chief executive Juliet Maclean and director John Penno, is offering $2.10 a share to Synlait Farms investors in a full takeover bid for the company which operates 13 dairy farms and a total herd of almost 13,000 cows. That’s a 31 percent premium to the $1.60 price the shares last traded at on the Unlisted platform.

If the takeover is successful, SFL plans to inject a further $20 million in fresh capital to reduce debt and accelerate investment. It also plans to reinvest all surplus cash to fund further growth. Penno and Maclean will hold about 26 percent of SFL, with Pengxin owning the rest via New Zealand Standard Farm, a subsidiary of its Milk New Zealand unit. . .

Spierings blames ‘she’ll be right attitude’ for Fonterra botulism scare - Christopher Adams:

Fonterra chief executive Theo Spierings compared the company’s botulism debacle to Emirates Team New Zealand’s near-capsize during the America’s Cup. Photo / Greg Bowker

Fonterra chief executive Theo Spierings says a “she’ll be right attitude” was one of the causes of the company’s botulism fiasco.

Business leaders have gathered in Auckland today for the annual China Business Summit.

The event’s main focus this year is the ongoing impact of Fonterra’s whey protein contamination scare, which led to a global recall of consumer products, including infant formula, but turned out to be a false alarm.

Addressing the summit, Spierings said Fonterra was world class in manufacturing and food safety but the company still needed to “lift its game”.

“That was one the key learnings [of the botulism scare] – a ‘she’ll be right’ attitude is not acceptable,” he said. . .

Primary Growth Partnership enhances world-class Mozzarella technology:

A Primary Growth Partnership programme is helping deliver world-leading patented technology for the production of quick-frozen grated mozzarella.

The Transforming the Dairy Value Chain programme is driven by Fonterra, Dairy NZ and the Ministry for Primary Industries (MPI) under the Primary Growth Partnership. The technology, which is being expanded at Fonterra’s Clandeboye site in South Canterbury, enables quick-frozen, natural, shredded mozzarella to be produced in just a day—a process traditionally taking around two months.

“This is a key demonstration of the type of innovation that is being enabled by the Primary Growth Partnership,” says Justine Gilliland, Director Primary Growth Partnership, MPI. . .

Creating the ‘angus moment’ – Gerald Piddock:

Angus beef must position itself as a guilt-free indulgence for wealthy consumers around the world if it is to prosper in the modern world, a leading brand strategist says.

But to achieve this would require a new way of thinking, Brian Richards told farmers at the World Angus Forum in Rotorua.

It meant angus farmers viewing themselves not just as sellers of protein but also as producers of a food experience, Richards said in his keynote address at the forum. . .

New Zealand wine industry ‘icon’ receives 2013 trans-Tasman agribusiness leadership award:

New Zealand wine industry luminary Sir George Fistonich has been named the recipient of the 2013 Rabobank Leadership Award for his outstanding contribution to agribusiness.

A pioneer of modern-day winemaking in New Zealand, Sir George, the founder and owner of Villa Maria Estate, was presented with the prestigious trans-Tasman honour at the annual Rabobank Leadership Award Dinner in Melbourne last night.

Australian grains industry advocate Georgie Aley was named Rabobank Emerging Leader, a new award category recognising up-and-coming young leaders in New Zealand and Australia’s food, beverage and agribusiness industries.

Announcing the award winners, Rabobank Australia & New Zealand Group managing director Thos Gieskes said Sir George Fistonich had spent five decades at the forefront of New Zealand’s wine industry and had been an instrumental figure in the rise of New Zealand wines on the world stage.

“In a career spanning 50 years, George Fistonich has exemplified true leadership along with an extraordinary passion for the New Zealand wine industry – successfully leading not just his own business, but helping to pioneer and drive an entire industry and inspire and mentor those around him,” Mr Gieskes said.  . .  (I posted on the award yesterday, but this is the official media release).

Waiting for Nuffield – RivettingKateTaylor:

It’s Nuffield time of year again.

Years ago, a Young Farmers friend, arable farmer Hugh Ritchie, was awarded a Nuffield Scholarship. I think I was working for radio or the HB Herald Tribune at the time and did a story on his selection.

Now I work for Nuffield NZ in a freelance journalist role and see the scholars come and go (literally – six months of overseas travel/research is an integral part of a scholarship). . .

Oaklands Milk now from A2 dairy herds:

Local dairy farmer Julian Raine, has announced that all Oakland’s milk naturally contains A2 beta casein proteins. He says “Centuries ago all cow’s milk contained this protein but as dairy herds around the world have been bred and selected for higher production the incidence of the A1 variation has increased.”

Through genetic testing Mr Raine has been able to select cows from his two Nelson dairy herds that have only the A2 gene. These cows are milked separately and it is only this pasteurised milk that is currently sold through vending machines located at Oakland’s farm gate. . .

Kiwi company takes the spotlight with its world-leading technology:

Global players in the fresh produce industry will this weekend get a first-hand look at innovative fruit sorting solutions from Kiwi company BBC Technologies, the world’s leading supplier of blueberry sorting and packing machinery.

BBC Technologies, specialists in the development and manufacturing of advanced processing technology, will be showcasing its range, for the first time, at the Produce Marketing Association’s (PMA) Fresh Summit Convention & Expo in New Orleans.

PMA’s Fresh Summit is one of the largest trade shows held in the United States, drawing more than 18,000 visitors from over 60 countries. North America is a key market for BBC, with the thriving New Zealand company recording 30 per cent year on year growth. . .


Rural round-up

September 28, 2013

Private Investors announced for Ruataniwha Water Storage Scheme:

Two well-known New Zealand companies have signalled their intention to potentially invest in the Ruataniwha Water Storage Scheme in Hawke’s Bay.

TrustPower Limited and Ngāi Tahu Holdings Corporation Limited (NTHC) have each signed a Memorandum of Understanding with Hawke’s Bay Regional Investment Company Limited (HBRIC Ltd) to potentially invest in the Ruataniwha Water Storage Scheme in Hawke’s Bay.  HBRIC Ltd is Hawke’s Bay Regional Council’s investment company and lead entity for the Ruataniwha Water Storage Scheme which, if approved, has the potential to improve the water quality and quantity in the Tukituki River and reliably irrigate up to 30,000 hectares of land. 

All parties emphasise their commitment to deliver the best possible outcomes for the Hawke’s Bay region, across environmental, social, cultural and economic values.  Today’s announcement comes after significant combined investigations by the two potential investors with HBRIC Ltd. . .

Putting NZ dairy innovation on the world stage:

New Zealand-owned dairy technology innovator, Waikato Milking Systems, will showcase its expertise in large-scale, high-volume milking systems at the World Dairy Expo in the United States.

The 100% New Zealand-owned and operated company will display a selection of its products at the show, including products specifically designed for high-producing, 24-hour dairy operations. The international show is in Madison, Wisconsin from October 1 to 5.

“The World Dairy Expo attracts leading dairy operators from all over the globe. It is a great opportunity to put New Zealand dairy innovation and technology on the world map,” Waikato Milking Systems Chief Executive Dean Bell says. “Our rotary milking systems are known for being reliable and robust with very little maintenance required – ideal for withstanding the rigours of 24 hour milking.” . . .

Central Otago country hotel wins accolade at national hospitality awards:

A Central Otago country hotel has taken out one of the top accolades at this year’s Hospitality New Zealand Awards for Excellence. Chatto Creek Tavern near Alexandra won the Best Country Hotel title.

The Hospitality New Zealand Awards for Excellence were announced in Queenstown last night. The Supreme Champion award was presented to The Batch Café in Invercargill. Winners were announced in 16 categories and encompassed a vast geographic spread of hospitality businesses throughout the country. . .

DINZ keen to ensure that AgResearch’s Future Footprint delivers for deer industry:

Deer Industry New Zealand (DINZ) is looking forward to working with AgResearch in the implementation of its Future Footprint plan, which AgResearch announced yesterday it would proceed with.

DINZ Deputy Chair, Jerry Bell, said today that “there has certainly been concern in our industry about the impact of the Future Footprint plan on deer research. Industry representatives have sought assurances that deer research will be not diminished and have received a strong commitment from AgResearch to our on-going deer research programme”.

“People at the Invermay campus have been absolutely critical in the success of our industry, but the reality is that deer research has been contributed to from a range of campuses for some time now. What’s of greatest importance is the quality of, and the investment in those people, not necessarily where they are”. . .

Top 40 Cooperatives And Mutuals Top $41Bn Revenue:

The 2013 New Zealand Cooperative and Mutual Top 40 list was launched by Minister of Commerce Craig Foss at the Cooperative Business New Zealand annual meeting in Wellington on 17th September.

Showing a combined annual revenue of $41,129,034,964 for the year 2011-12, the Top 40 cooperatives in New Zealand ranged from Fonterra Cooperative Group and Foodstuffs at the top through Southern Cross Healthcare Society and Mitre10 to Ashburton Trading Society, the Dairy Goat Cooperative and World Travellers, with the NZ Honey Producers Cooperative coming in at #40.

“I think it is important that New Zealanders sit up and take notice of cooperatives; they help drive the economy, respond to social change and create jobs in a variety of sectors. While they may often be low profile, they are significant economic actors,” said Minister Foss. . .

Progressive Enterprises confirms no sulphites in fresh meat:

Progressive Enterprises does not add sulphites to its fresh meat and the recent samples taken by the Ministry for Primary Industries, which showed positive results for sulphites, were not from any Countdown, SuperValue or FreshChoice supermarket. 

Progressive Enterprises is disappointed that media coverage of the MPI testing has provided an inaccurate and misleading impression that samples which tested positive for sulphites were found in major supermarkets. . .

Fonterra Farewells

Fonterra Co-operative Limited today farewelled its former Chief Financial Officer Jonathan Mason who retires from the Co-operative at the end of this week.

Fonterra Chief Executive Theo Spierings said Mr Mason would leave behind an invaluable legacy: “Jonathan joined us in 2009, in the midst of the global financial crisis. He led our finance team through those difficult times, and the Co-operative emerged from the crisis in a strong position. He then helped to deliver our new capital structure with the successful implementation of Trading Among Farmers.

“During his time here, Jonathan has also dedicated himself to building and strengthening our finance function and team. . .

Former CFO:


Fonterra final payout up

September 25, 2013

Yesterday we had the good news of a higher – and record – forecast milk payout for this season and today a higher than forecast payout for last season.

Fonterra Co-operative Group announced today a Cash Payout of $6.16 for the 2013 year for a 100 percent share-backed farmer, comprising a Farmgate Milk Price of $5.84 per kgMS and a dividend of 32 cents per share.

Chairman John Wilson said that while the Payout was higher than forecast at the beginning of the season, it was 4 per cent down on the previous year.

“2013 was a year that tested our resilience.  After a superb first six months for both production and performance, our farmer shareholders endured a drought which in some regions was the worst in nearly 70 years.

“The extremely dry conditions meant a drop in New Zealand milk production of 9 per cent in the last six months of the season.  Overall, New Zealand milk production declined 2 per cent to 1,463 million kgMS for the season to 31 May 2013, which hit our farmers and the business financially.

“Our strong balance sheet, with a debt to debt plus equity ratio of 39.6 per cent, and operating cash flows meant we were able to support farmers through the drought’s immediate impact by raising the Advance Rate paid to farmers for their milk.  This change, however, contributed to a 28 per cent drop in operating cash flows compared with the previous year.

“We now have a much stronger capital structure which came into its own this year, following the launch of the Fonterra Shareholders’ Market and the Fonterra Shareholders’ Fund. 

“The Fonterra Shareholders’ Market brought in greater flexibility, with farmers able to buy and sell shares throughout the year at the prevailing price. 

“Meanwhile, the response to the Fund from both institutions and smaller investors was a genuine expression of confidence in the Co-operative and our performance,” said Mr Wilson.

Farmers are still questioning whether TAF (Trading Among Farmers) was the right move but fears it would impact on the milk payout haven’t been realised.

Fonterra Chief Executive Theo Spierings said Fonterra had made good progress with its strategy during the year, particularly in foodservice, everyday nutrition and advanced nutrition. Climatic and market conditions, however, frustrated efforts to achieve higher earnings.

“The combined impact of the drought and the reshaping of Fonterra’s Australian business, saw the Co-operative’s normalised EBIT of $1 billion for the 2013 year fall 3 per cent short of last year.

“The business achieved strong EBIT growth in Asia, Africa, the Middle East and in our Soprole business in Chile.  However, this was offset by a weaker second half from NZ Milk Products and a 37 per cent decline in normalised EBIT in Australia and New Zealand (ANZ) as we make changes to our Australian business.

“The extreme drought caused unprecedented volatility – reflected in a 64 per cent spike in Whole Milk Powder prices from January 2 to April 16.  This, in turn, had a significant impact on the cost of milk purchased by NZ Milk Products, and meant the high returns achieved in the first half as a result of price premiums, product mix, cost savings and productivity gains were eroded in the second half.

“Although the New Zealand consumer business grew its earnings in a tough trading environment, Australia faced heightened competition for lower milk volumes, and continuing margin squeeze for consumer brands.  We expect the significant reshaping of our Australian operations, which is going to plan, will turn performance around.  The business has already achieved a 7 per cent reduction in operating expenses of $49 million (after excluding the impact of the closure of the Cororooke site and Brand impairments),” said Mr Spierings.

Net finance costs were $41 million lower than last year, mainly due to the benefit of an increase in gains from fixed interest rate hedging and the lower cost of funding. Earnings also benefitted from a tax credit of $68 million which was primarily due to the revaluation of deferred tax balances and recognition of New Zealand tax losses.

Earnings per share were up 7 per cent to 44 cents after taking into account the bonus issue, and on a normalised basis were up 9 per cent to 47 cents per share.

Precautionary Recall, Reviews and Rebuilding Reputation

Just as farms and farmer confidence started to recover from the drought, Fonterra initiated a precautionary recall of some whey protein concentrate, as a result of test results received on the last day of the Co-operative’s financial year.

“The subsequent all clear following further tests was a relief, but did not alter our view that the recall was the correct course of action at the time.  Fonterra cannot, and will not, take risks with food safety and the health of consumers,” said Mr Wilson.

“The thorough internal Operational Review instigated by CEO Theo Spierings has been completed.  The Board is also undertaking its own independent inquiry and we are fully co-operating with the New Zealand Government’s Joint Ministerial Inquiry which is taking place over a longer timeframe,” said Mr Wilson.

The precautionary recall challenged the Co-operative, but has also provided the opportunity to make a profound change for the better, said Mr Spierings.

“Within days of locating and quarantining product, we began an operational review to find out what happened, why, and what we must do to prevent this from happening again – and we are now implementing the recommendations of the review.

“Additional resources have also been deployed to ensure we manage change and rebuild our reputation, while at the same time we continue to run the business efficiently. The creation of a new role of Group Director of Food Safety & Quality, reporting directly to me, sends a clear message about the sharper focus we are giving to continuously improving food safety and quality.

The way this was handled, and in particular the way the issue was communicated, let the co-operative, its suppliers, shareholders, customers and New Zealand’s reputation down.

The changes made must result in far better systems and communication.

“In the past year, we have invested $925 million in building production, manufacturing and supply chain capability to process our New Zealand milk, developing our China farms, as well as beginning construction of a $144 million new cheese and dairy ingredients plant in partnership with A-ware Food Group in the Netherlands.

“We have also made a number of key senior appointments to our management team.  In addition to the appointment of Judith Swales as Managing Director Australia, we have hired Lukas Paravicini as our new Chief Financial Officer, and Jacqueline Chow as Managing Director of Global Brands and Nutrition.

“They join an already strong, dedicated management team which will drive the business forward in the coming year,” said Mr Spierings.  . . .

The full annual results are here.


Fonterra forecast payout up 50c

September 24, 2013

Fonterra chair John Wilson has announced a 50 cent  increase in the forecast milk  payout for the 2014 season.

That takes the forecast farm gate price to $8.30 per kgMS which with an estimated dividend of 32 cents per share amounts to a forecast cash payout for this season of  $8.62.

“The record Forecast Farmgate Milk Price reflected continuing strong international prices for dairy, particularly Whole Milk Powder driven by robust demand from Asia, especially China.  We are still facing high levels of volatility around the world.”

Chief Executive Theo Spierings said the business, however, also faces headwinds, especially in the first half of the current financial year when we expect earnings will be significantly lower than the strong performance in the first half of 2013.

“The higher cost of goods will make it more difficult to drive earnings growth in our consumer and food service businesses in the first half of this financial year.  We also expect to see a negative impact on our product mix returns during the first half of the current year as milk powder prices significantly outpace the relative prices of cheese and casein.

“Prospects for the second half look more positive for our consumer businesses, but remain uncertain for NZ Milk Products.

“Our estimated dividend of 32 cents per share for 2014 currently remains unchanged.  Fonterra can draw upon its balance sheet and cash flow performance to support the estimated dividend.

“It is difficult to predict when extreme price volatility on product mix will reverse, but expectations are that the impact is likely to be short-term.

“We continue to have confidence in our Volume and Value strategy in our key markets. Looking ahead, prospects for the dairy industry and for Fonterra look positive and our growth ambitions remain unchanged,” said Mr Spierings.

This is good news for farmers and the wider economy but no-one should bank on this level of payout for next season.


Rural round-up

September 10, 2013

Could have done better – Hugh Stringleman:

Fonterra’s operational review of the botulinum food-safety scare has identified opportunities when the mess might have been avoided.

Group director of strategy Maury Leyland and her in-house team have also come up with several ways of preventing something like this happening again.

Fonterra said its world-class manufacturing facilities, quality systems, and robust testing regimes were all stress-tested by the incident.

“Overall our systems worked well, while some aspects showed room for further improvement,” Leyland said.

Chief executive Theo Spierings said many innovative actions had resulted from the review and Fonterra remained well-placed as the world leader in dairy nutrition but with no room for arrogance. . .

Primary role push for deer markets :

Dan Coup’s heart lies in New Zealand’s primary sector.

Mr Coup in July took over as chief executive of Deer Industry New Zealand, replacing Mark O’Connor, who stood down after 13 years in the position to run his family-owned investment business.

Less than two months into the role and Mr Coup is excited about the opportunities for the industry, while being realistic about the challenges it faces. . .

Young farmers’ CEO experienced – Sally Rae:

Terry Copeland has been appointed chief executive of New Zealand Young Farmers.

Mr Copeland’s background includes management, sales and marketing, supply chain management, tertiary teaching, journalism and being a brand ambassador.

His latest post was with Treasury Wine Estates, the second largest wine company globally. He led the export strategy and the supply chain team for four years. . .

Satisfaction in seeing improvement :

Colinswood Bush is alive with birdsong and has the feel of forest, a tribute to Conservation Award finalist Nigel McPherson’s stewardship. Mr McPherson (84) talks about 20 years leading the volunteers responsible for the restoration of the biodiversity of the native forest remnant on Otago Peninsula.

What is it about the project that got you involved and kept you interested?
Colinswood Bush is on private land at Macandrew Bay and has been protected by a Department of Conservation covenant since 1993. Here was a native bush remnant in the early stages of recovery previously neglected, but still with damage from grazing animals, wind, muehlenbeckia and other weed vines smothering lower growing trees, weeds and weed trees in plenty; but also the results by others to restore the original forest and some remaining good specimen trees such as broadleaf, kowhai, lacebark, a matai and nearby two substantial totara pointing to the possibilities that restoration was a realistic goal. . .

Farmlands Acquires NRM:

Farmlands Co-operative Society Limited has announced they have acquired the brand and business of NRM, an iconic New Zealand agricultural brand in the animal nutrition business. Farmlands, in partnership with commercial pig and poultry feed producer Mainfeeds, bought the New Zealand feed milling assets of Viterra, which became available for sale following the global acquisition of Viterra by Glencore.

The purchase will be completed over the next two months.

Commenting on the acquisition, Farmlands Chairman Lachie Johnstone said, “The purchase of NRM will deliver significant benefits to shareholders as part of the co-operatives animal nutrition strategy. Nutrition and water are increasingly recognised as two of the keys in furthering the development of agricultural production. . .

10 Reasons to be at the NZB Ready to Run Sale:

With catalogue production in full swing for New Zealand Bloodstock’s 2013 Ready to Run Sale of 2YOs here are 10 great reasons to consider making a trip to Karaka in November for this flourishing Sale:
RTR Cat Cover

11 Individual Group 1 winners in the past 6 seasons

15 Group 1 victories in the past 6 seasons

6 Derby winners since 2010

7 Cups wins in NZ since 2009 . . .


Rural round-up

August 31, 2013

Fonterra Leadership to Visit China Next Week:

Fonterra Chairman John Wilson and CEO Theo Spierings will lead a Board of Directors visit to China next week to meet with Fonterra management and key stakeholders.

Mr Wilson said the Co-operative’s Board had already planned to visit China in early September for Directors to meet with Fonterra staff and stakeholders, and view progress on Fonterra’s farming hub in Yutian.

“Now that it has been confirmed that there was no Clostridium botulinum in our whey protein concentrate, we need to address any remaining concerns our stakeholders in China might have. . .

Fonterra’s false alarm shows danger of ‘crying wolf’:

Victoria and Otago Marketing academics provide expert comment on the Fonterra crisis:

Although it is good news that Fonterra received the ‘all clear’ from the Ministry for Primary Industries yesterday, a lot more needs to be done to restore New Zealand’s reputation, say academics from Victoria University of Wellington and the University of Otago.

Dr Hongzhi Gao, Senior Lecturer in Marketing at Victoria Business School and Senior Research Fellow of the New Zealand Contemporary China Research Centre, says the New Zealand government and business communities still have a big job ahead to ensure the official findings filter through to the global market.

“Negativity was so widely spread overseas that a proper public relations campaign needs to be planned and implemented in key dairy export markets, including China. If it is done well, the crisis may be turned into an opportunity for New Zealand’s brand,” says Dr Gao. . .

PGG Wrightson sells Heartland stake for $11.3 million to reduce debt – Tina Morrison

(BusinessDesk) – PGG Wrightson, the rural services company controlled by China’s Agria Corp, sold its stake in Heartland New Zealand for $11.3 million to reduce debt.

Christchurch-based Wrightson sold 13.18 million shares in Heartland, the parent of the country’s newest bank, through a brokerage yesterday at 84 cents a share, a 3.4 percent discount to the 87 cent share price Heartland was trading at immediately prior to the sale. Wrightson acquired the stake as part of the sale of its finance arm to Heartland.

“It wasn’t a strategic holding for us, it’s not our core business,” said company secretary Julian Daly. The stock price “was at a level that we were satisfied with.” . . .

Yashili Granted Consent for Infant Forumla Plant in Pokeno:

Independent commissioner Michael Savage has granted land use consent to Chinese company Yashili NZ Dairy Co Ltd to construct and run a $220 million infant formula plant in Pokeno.

This follows a three day hearing which took place on Wednesday 31 July – Friday 2 August at the Waikato District Council Chambers in Ngaruawahia.

The Council’s Regulatory Committee appointed Michael Savage as the independent Commissioner to hear the application, which received 27 submissions with five submitters heard at the hearing. . .

Synlait Milk will process more milk than forecast in FY14:

Synlait Milk will process more milk than forecast following a decision to take a significant allocation of milk under the Dairy Industry Restructuring Act in the financial year to 31 July 2014.

The decision was made after further planning and a small investment in plant and equipment resulted in an opportunity to increase production capacity of its ingredient products without impacting the forecast infant formula and nutritional products business.

The extra milk will result in an increase to the forecast milk supply and production volumes of its ingredient products as stated in the prospective financial information (“PFI”) of its prospectus issued in June 2013. While early in the season the additional total production provides the Company with increased confidence in achieving its forecast financial result for FY2014. . .

Westland Milk Products joins the ‘good news club’:

Federated Farmers West Coast says New Zealand’s second largest dairy cooperative, Westland Milk Products, has now joined the ‘good news club.’ The cooperative has revised its 2013/14 forecast payout to a range of $7.60-8.00 per kilogram of milk solids (kg/MS), with a new advance rate of $5 kg/MS.

“It has been one hell of an August. I even saw someone at Federated Farmers head office tag it as dairying’s ‘mensis horribilis’,” says Richard Reynolds, Federated Farmers West Coast Dairy chairperson.

“Frankly, West Coast farmers like me are counting down to 20 September when we get the advance. After the rare West Coast drought this year, we’ve got more than an overdraft to start clearing. . .


Rural round-up

August 26, 2013

New irrigation system being trialled - Sally Rae:

The development of a new irrigation system, being trialled in North Otago, has been described as a potential ground-breaker for the industry.

RX Plastics, the Ashburton-based manufacturer and distributor of the K-Line irrigation pod and sprinkler system, has produced the G-Set irrigation system, which it believes meets a gap in the market for an efficient system that irrigates more challenging areas.

G-Set was an embedded system that could be installed anywhere that irrigation pipe could be run, making it more suitable for more difficult terrain, hill slopes and irregular shaped pastures, sales and marketing manager Phil Gatehouse said. . .

Sour times in the dairy industry – Sally Rae:

Queen Elizabeth famously had one in 1992. Now it is dairy giant Fonterra – New Zealand’s largest exporter – that has experienced an ”annus horribilis”, as agribusiness reporter Sally Rae reports.

January 2013: Fonterra moves to persuade global customers that New Zealand dairy products are safe in the wake of the discovery of dicyandiamide residue in milk.

Chief executive Theo Spierings says the co-operative’s testing found only minute traces of DCD – a nitrification inhibitor used by the dairy industry to reduce nitrate leaching into waterways and greenhouse gas emissions – and they were about 100 times lower than acceptable levels under European food safety limits. . .

Think of rural communities – Rebecca Harper:

Earthquakes have become too much of a regular occurrence for many New Zealanders.

The earth moving can be a frightening and destructive thing.

The latest significant quake was centred in Seddon on August 16. The force was reportedly comparable to that felt in central Christchurch on February 22, 2011.

Almost every home in Seddon was damaged by the earthquake swarm, which began with a magnitude 6.6 quake at 2.31pm on Friday, August 16. About 50 aftershocks of magnitude four or more rocked the region in the 30 hours after the initial jolt. . .

Making money in the hills and on the flats:

HILL COUNTRY farmers should put their efforts and energy into increasing lambing and calving rates, rather than trying to finish stock.

Meanwhile finishers should focus on daily liveweight gain and maximum return on feeds.

That’s the message large-scale finisher Roger Dalrymple, Bulls, gave a recent BRIG (Beef Returns Improvement Group – see panel) seminar near Hunterville, Rantikei.

“The one thing that hill country farmers can influence most is their lambing percentage and if they increase this from say 110% to 130%, their returns will skyrocket,” Dalrymple says. . .

POTATO TOM, a probable world first:

ONE PLANT, two crops: it’s a bit like having your cake and eating it and for New Zealanders it could be reality this summer.

How? With an innovation Tharfield Nursery, Katikati, is marketing nationwide in what it believes is a world first commercialisation. The Western Bay of Plenty operation has grafted thousands of Gardeners Delight tomato plants onto Agria potatoes to create the POTATO TOM, a trademarked seedling it is distributing under its incredible edibles brand. “It will produce a great yield of potatoes and tomatoes,” says nursery general manager, Andrew Boylan. While the idea of grafting a tomato with a potato is not new this could be the first time anyone has successfully developed this combination at a commercial level globally, he adds. . .

Woodchip wins stand-off study:

WELL MANAGED woodchip is the best stand-off for cow care judging by the findings of a Dairy NZ research project.

Agresearch scientist Karen Schulz presented the results of the three month trial at a recent field day at Fonterra’s Jordan Valley farm, Northland.

During the trial 80 pregnant non-lactating cows were split into groups and allocated to one of four different stand-off surfaces for eighteen hours/day, and pasture for the remainder of the day.

After four days of this on-off regime, they had a week on pasture with researchers continuing to record lying times as well as signs of leg health, walking gait and dirtyness. . .


Rural round-up

August 24, 2013

Farming Crises “hide ministry’s good work’ – Jon Morgan:

Ministry for Primary Industries officials are back in minister Nathan Guy’s good books.

Three months ago Guy upbraided the ministry for paperwork mistakes that left hundreds of tonnes of frozen meat stranded at China’s borders.

“I’m very disappointed in my officials,” he said. “Issuing export certification is really their core business and I’m disappointed in how this issue has come to bear.”

A ministry review pinpointed an unnotified change in templates for certifying exports as the cause of the holdup, which has now been cleared, and that this was compounded by a failure to inform senior managers and ministers quickly. . .

Fonterra achieves record GDT sales in August:

Fonterra today confirmed that it has achieved record sales and revenues from its two August GlobalDairyTrade (GDT) auctions.

Fonterra achieved its highest-ever monthly revenue through GDT in August, selling 109,664 metric tonnes, worth NZD 685 million.

Fonterra Chief Executive, Theo Spierings, said, “The past two GDT events show continued confidence in our products and strong demand from many of our key markets. . .

Opportunity for cross-agricultural collaboration:

Joint teaching and research in animal science and agronomy brought together Lincoln University and China’s Henan Agricultural University on Monday 19 August to discuss further opportunities to promote academic collaboration and exchange.

Located in Zhengzhou, China, Henan Agricultural University (HAU) is a world leading interdisciplinary research and teaching university that maintains its original guiding principles of serving the needs of the agricultural sector, rural areas and farmers. 

“Lincoln University has regularly received postgraduate students from Henan Agricultural University and the similarities of both institutions provide an excellent opportunity for further engagement,” says Lincoln University Director, International, Strategy and Marketing, Julia Innocente-Jones. . .

Red Meat Profit Partnership appoints Chairman:

The Red Meat Profit Partnership (RMPP), a consortium of red meat sector participants completing a Primary Growth Partnership agreement with the Crown, has appointed Malcolm Bailey as its Independent Chairman.

Bailey, well known in New Zealand agribusiness, is a former National President of Federated Farmers, a former Special Agricultural Trade Envoy for the Crown and a current Director of Fonterra. He is also a Westpac NZ Ltd Director, Chairman of the Dairy Companies Association of New Zealand and a member of the Food & Agriculture International Trade Policy Council (IPC), based in Washington DC. . .

Bootcamp brings together economic powerhouses:

The Primary Sector CEO Bootcamp conference over the last two days has been a major success, says Primary Industries Minister Nathan Guy.

“Over the last two days in Wellington this conference has brought together 35 top agribusiness leaders and five Government agency Chief Executives into one room, representing 80% of all our primary sector exports,” says Mr Guy.

“The Bootcamp initiative started in 2012 and has involved CEOs working together to grow our export earnings and take advantage of major opportunities around the world.

“There is renewed determination to double our primary sector exports to $64 billion by 2025 and establish New Zealand as a premium producer of food and fibre. This is an ambitious but very achievable goal, with the right policies and leadership from both Government and industry. . .

MPI completes large compliance operation:

Ministry for Primary Industries (MPI) Compliance Officers have just completed a far-reaching operation in the greater Waikato, Bay of Plenty and Coromandel regions.

Codenamed “Operation Nevada” officers spent two days last week undertaking a wide range of inspections targeting black market meat, black-market fish and maintaining a watch across the animal welfare sector. More than 50 MPI Compliance staff were involved in the operation which was carried out over the 14th and 15th of August.

MPI officers visited multiple sale yards across Waikato to liaise with farmers and other stakeholders and ensure compliance with the Animal Welfare Act 1999 and National Animal Identification and Tracing (NAIT) requirements. A number of visits to farms were carried out for the animal welfare part of the operation reinforcing codes of welfare. . .

Ballance announces new Chief Financial Officer:

Ballance Agri-Nutrients has announced Richard Hopkins as its new Chief Financial Officer, succeeding David O’Reilly who has recently retired.

Chief Executive Larry Bilodeau says Mr O’Reilly made a significant contribution to the business throughout his 24 years of service, and he has left Ballance in good hands with Mr Hopkins.

Under Mr O’Reilly’s guidance as Chief Financial Officer Ballance has evolved and grown to become one of New Zealand’s ‘Top 40’ companies.

“When David started we were a relatively small business with revenue less than $100 million, and almost two decades later he has helped our revenue grow much closer to $1 billion. I thank him for his immense contribution and dedication to the co-operative,” said Mr Bilodeau. . .


Rural round-up

August 22, 2013

Age crisis dawns as sunset years sets on workers - Hugh Stringleman:

KPMG has delved into the perplexing reasons why young people don’t take careers in agriculture more seriously in a country which relies upon the primary sector. Hugh Stringleman has read its latest Agribusiness Agenda report.

The capability of the people who work the land has made New Zealand what it is today.

While competitors can replicate equipment and processes, it is not easy to replicate the insight and relationships that people have developed over decades, according to the latest KPMG agribusiness report.

But the ages of existing farmers, orchardists and scientists continue to rise and the entire primary sector faces manpower shortages now and in the future. . .

Balance sheets under stress from lower livestock numbers – Allan Barber:

After the discussions between meat companies, lobbying by MIE, conferences and strategy debates, right now an eerie calm has settled over the meat industry. This is partly due to the mid winter slowdown in processing activity with only bobby calves to get excited about

At this time of year companies are doing their best to minimise any losses in the last quarter. There is no doubt the final results will be a lot better than last year, but they have to be, because the large companies could not sustain another big hit to their balance sheets.

Combined current and non-current debt between Silver Fern Farms, Alliance and ANZCO of $710 million at 30 September 2012 to fund losses and inventories means a substantial improvement this season is absolutely essential. The noises from the processors suggest moderate profits at best, mainly because of a sell down of inventory leading to reduced current debt and better control of procurement, offset by lower margins. . .

Spierings leads charge of change – Fran O’Sullivan:

Fonterra boss Theo Spierings has consolidated his powerbase at the dairy co-operative with chairman John Wilson’s emailed statement to shareholders that the board has confidence in the way the chief executive is handling the tainted whey protein affair.

The brutal truth is that long-time senior executive Gary Romano – who ran the New Zealand operation – had already offered himself up as the sacrificial lamb.

Romano’s resignation came before the various inquiry teams had even started delving into who to blame for the late discovery of “clostridium” in a batch of whey protein which had been made into infant formula and other products.

Since then two other executives have been put on leave – a clear indication that Fonterra already has a good idea where the buck will stop on this fiasco. . .

Auctioneers competition returns:

Following a successful inaugural event, the Heartland Bank Young Auctioneers Competition will return to the Canterbury A&P Show in 2013. 

The competition aims to showcase and develop young livestock auctioneers and improve the standard of auctioneering across the board. 

During the judging, which includes a test of auction rules and a mock auction, each entrant will be required to sell three lots of heifers/bulls. . .

Eastern Southland Dairy Conversion Benefits from Farm Environment Competition:

Entering the Ballance Farm Environment Awards helped a fledgling Southland dairy operation measure its progress as a successful and sustainable farming business.

South Coast Dairy Ltd, an equity partnership between five families, owns 202ha between Curio Bay and the Haldane Estuary in Eastern Southland. The former sheep and beef farm was converted four years ago and now milks 385 cows on a 135ha milking platform.

Mindful of the farm’s location in a sensitive coastal area, the owners have made a big effort to mitigate the environmental impacts of dairying, with extensive riparian fencing and planting work conducted following consultation with the Department of Conservation, Environment Southland, Landcare Trust and Fish and Game. . .

Brancott Vineyard celebrates its 40th anniversary:

As the pioneers of the Marlborough wine region and its signature varietals, Sauvignon Blanc and Pinot Noir, Brancott Estate is excited to celebrate 40 years since the first planting of vines at Brancott Vineyard, home of world-renowned Brancott Estate wines.

On 24 August 1973, in front of a crowd of local media, politicians and business leaders, the Marlborough wine industry was born. At the time, the founder of what is now Brancott Estate, Frank Yukich made the statement that “wines from here will become world-famous” – and indeed they have, receiving many prestigious awards and accolades around the world. . .


Rural round-up

August 18, 2013

Lamb prices down but prospects positive – Tim Cronshaw:

Average lamb prices look as though they will be down 25 per cent nationally at $84 to $85 a lamb for the 2012-13 season ending next month.

Softer overseas markets in the northern hemisphere and smaller lamb weights from the drought drove prices down from $113.60 the previous season.

While it’s early days yet the Economic Service at Beef + Lamb New Zealand expects prices will be somewhere between $90 to $100 for the coming 2013-14 season. That will depend heavily on the state of the dollar with the latest analysis for it to weaken slightly. . .

Fonterra trialling RTVs as quad bike replacement - Sue O’Dowd:

FONTERRA’S year-long trial of rough terrain vehicles to replace quad bikes on its farms looks promising as it draws to a close.

Two vehicles are being tested at the 225ha Whareroa Research Farm near Hawera, where 640 cows are being milked this year.

The company is testing five RTVs on drystock farms in the South Island and four on dairy farms.

The trial, which began before the Government Taskforce on Health and Safety completed its report in April this year, will conclude in December. By then, it will have covered the entire farm season. . .

Dam ‘scary challenge’ to nature – Tony Benny:

Opponents of the planned 8.2 million cubic metre storage dam for the Waimakariri irrigation scheme have vowed to fight the proposal, saying it will put lives at risk if breached in a earthquake.

About 70 people attended a meeting in West Eyreton Hall last week to hear from the Eyre Community Environmental Safety Society (ECESS), the group set up to oppose the dam.

“ECESS believes WIL’s [Waimakariri Irrigation Ltd] solution of a 13-metre-high one kilometre square dam in a seismically active climate is wilfully placing lives at risk to keep shareholder company costs down,” said society chairperson Catherine Ballinger. . .

Why it’s time to get off the grass:

New Zealand can climb its way back up the international wealth tables, argue two scientists in a book* launched last night. But we won’t do it if we continue to rely so heavily on agriculture.

*From Get Off the Grass: Kickstarting New Zealand’s Innovation Economy, by Shaun Hendy and Paul Callaghan (Auckland University Press, $34.99)

Prosperity describes a state of flourishing or thriving. In New Zealand there is a sense that we have flourished less than we might, and especially less than many other countries we like to compare ourselves with. Through insufficient resources, our health system is unable to provide the treatments that are available for free in countries such as Australia or Canada. Our infrastructure is decrepit, our roads are poor, our passenger train systems are an embarrassment to us, and many of our houses are inadequate or, even when new, badly built. Our native forests are in decline because we cannot afford to address pest control in a comprehensive manner. . .

Spierings’ profile unstained by taint scare – Andrea Fox:

Fonterra chief executive Theo Spierings’ job looks increasingly safe after the botulism contamination scare, with chairman John Wilson repeating the board’s support for the Dutchman’s handling of the incident.

In a letter to Fonterra’s 10,500 farmer-shareholders Wilson said he wanted to “reiterate” the board’s confidence in Spierings’ handling of the scare and the actions that have followed.

Wilson said he expected the board’s inquiry into the scare to be finished in six weeks.

The scare sparked panic in Asian and China consumer markets, and big recalls of baby formula made by one of Fonterra’s biggest customers, Danone. . .

Farmers sorry to see Romano go – Hugh Stringleman:

Farmers were quick to express sympathy for Gary Romano, who resigned last week as head of Fonterra processing after the botulism scare that happened on his watch.

Romano apparently felt responsible and resigned before results are known from four inquiries into the Hautapu plant dirty pipe and its aftermath.

“I presume he didn’t feel comfortable, felt his time was up and left on his own terms,” Federated Farmers dairy chairman Willy Leferink said.

“He was well liked and farmers will be very sorry to see him go.” . . .

The difference between a career and a job – Art 4 Agriculture:

Today’s guest blog comes from Cotton Young Farming Champion Liz Lobsey. You can read all about Liz here

Liz is an agronomist aka Plant Doctor and she loves her “career” and she loves to tell people why

This is what Liz has to say ………………….

I have recently had the pleasure of visiting 4 schools involved in the Archibull Prize for the Art4Agriculture program and I can honestly say that they all have been a different learning experience.

In the past week I can honestly say that I have spoken to children in kindergarten in Sydney who believe that all farmers have animals to children in cotton growing regions who weren’t quite sure what a cotton plant was. . .


Rural round-up

August 17, 2013

Chinese Kiwis defend NZ brand:

An analysis of social media in New Zealand and China has found an emerging group of Chinese residents in New Zealand and others with close ties to China, vigorously defending New Zealand’s brand in the wake of Fonterra’s whey protein contamination crisis.

The analysis was carried out by Dr Hongzhi Gao, a senior lecturer at Victoria Business School and senior research fellow of the New Zealand Contemporary China Research Centre; Vallen Han, Asia marketing director of New Zealand Post; and Simon Young, chief executive of syENGAGE, a social media consulting firm. . .

Two Fonterra managers sent on leave in botulism probe:

Fonterra has placed two of its senior managers on leave as it continues its internal investigation into the whey protein botulism scare.

Fonterra chief executive officer Theo Spierings says the company is moving quickly and establishing key facts and as they emerge they are taking appropriate action.

He says placing two people on leave does not pre-empt the findings of the review and they will continue to be involved in the ongoing investigation.

The review will be finished by the end of the month. . .

Beware sleeping US dairy giant – expert - Hugh Stringleman:

The giant United States dairy industry is re-gearing for exporting and may rival soon the influence of New Zealand in world dairy trade.

Rabobank International global strategist dairy Tim Hunt gave that message to dairy audiences throughout NZ last week.

An Australian economist, Hunt is based in New York and has a special interest in the contrasts between Oceania and North American dairying.

His prepared notes were called “Arise the Hunter, the reorientation of the US dairy industry and implications for NZ”. . .

Economy-wide lessons as white gold loses its shine – Eye 2 the Long Run:

It is critical to understand that the issues for the NZ economy arising from the current Fonterra debacle  (as opposed to dairy farmers and Fonterra directors and managers) is assuredly not a “public relations” issue or one of “reputational management”. The best PR firm in the world cannot resolve such issues through spin – nor should it try.

Calling for better “PR” is simply a form of denial.

Key problems from an economy wide perspective are:

1. Nowhere else to turn

The choice for producers has been narrowed by statute to Fonterra for some 90% of the market. There is virtually no diversity, depth or spread of processing in the industry. The statute prevents it. Dissatisfied producers have nowhere else to turn. All eggs in one basket – then we drop the basket. . . .

Lustrous lambs wanted:

The hunt is on for lambs with unusually lustrous fleece. Crown Research Institute Agresearch says if you have any such lambs this spring, it wants to hear from you.

“We particularly want to understand what proteins or cellular structure may be special to their wool, and then whether these are the same as those in the lustre breeds,” says David Scobie, who is leading the lamb quest.

“Studying a naturally occurring mutation with such a dramatic effect on fibre characteristics provides a unique opportunity to understand the genetic and physiological mechanisms affecting fibre quality.” . . .

AgResearch overhaul tipped to boost research - Annette Scott:

A proposal to overhaul AgResearch’s campus and farm infrastructure will create a vital agricultural research institute for the next 50 years, AgResearch chief executive Tom Richardson says.

The restructuring proposal involves axing 180 jobs at Ruakura, near Hamilton, and 85 jobs from the Invermay site near Dunedin.

The $100 million proposal would result in large campuses at Grasslands in Palmerston North and at Lincoln in Canterbury.

A final decision is expected next month following a four-week consultation period. . .

Federations’ ‘www.ruraljobs.co.nz’ a success:

Federated Farmers is thrilled its ‘Rural Jobs’ service has hit 115 job advertisements since the beginning of the year, promising a bright future for agricultural careers.

“www.ruraljobs.co.nz is a fantastic service and it is picking up traction as one of the leading rural job advertisers,” says Conor English, Federated Farmers Chief Executive.

“Great staff are critical to any farming operation. Federated Farmers wants to ensure that our youth realise these opportunities are available to them and that employers have all the right documentation to know what the legal requirements are.

“Our www.ruraljobs.co.nz is not only the place to go to match people with jobs, but also where you can get up to date employment contracts reflecting the latest law changes, information on nationwide wages and salary packages, immigration ACC and OSH requirements and free legal advice for our members. It is a great one stop shop, tailored for the farming sector” . . .


Rural round-up

August 13, 2013

Engaging youth in agriculture – the key to a secure food future – Farming First:

Engaging youth in agriculture has been a prominent topic recently and has risen up the development agenda, as there is growing concern worldwide that young people have become disenchanted with agriculture.

With most young people – around 85%living in developing countries, where agriculture is likely to provide the main source of income it is vital that young people are connected with farming.

Currently around the world we’re living in an era where rapid urbanisation has led to a decline in rural populations and for the first time ever the majority of the world’s population lives in a city. The UN World Health Organization predicts that “by 2030, 6 out of every 10 people will live in a city, and by 2050, this proportion will increase to 7 out of 10 people” meaning that more young people than ever before are moving to cities and towns to find work, leaving few behind to work in rural areas. . .

Fonterra’s Group Director of Strategy to lead Recovery Management Team:

 Fonterra today announced that Maury Leyland, Group Director of Strategy, will lead its Recovery Management Team responsible for the ongoing operations of the precautionary recall and will oversee the operational review announced by the CEO last week.

Chief Executive, Theo Spierings, said, “Maury will manage all aspects of the recent recall and will oversee the operational review I announced last week. She will report directly to me on progress and findings. This will be an in-depth review covering our business processes, information and traceability systems, and current ways of working, including decision-making processes”, Mr Spierings said.

Ms Leyland said the operational review is separate to the one being conducted by the Board of Directors of Fonterra, but that the findings will be shared directly with them.

“Our initial investigations have given us a clear idea of the events that led to our precautionary recall, but we now need to establish a detailed understanding of the processes, systems and decisions involved. . .

 

China’s Bright Dairy looking better after Fonterra’s food safety stumble, Moody’s says – Paul McBeth:

China’s Bright Food Group, a cornerstone stake in local processor Synlait Milk, is likely to get a boost from Fonterra Cooperative Group’s food scare and might get a credit rating upgrade from Moody’s Investors Service.

Fonterra is the biggest milk powder supplier into China with about 60 percent market share, and last week’s food safety scare is seen as credit positive for Bright Food’s Baa3 credit rating with a stable outlook, Moody’s said in a statement. The New Zealand dairy exporter discovered bacteria that can cause botulism, which sparked a recall of potentially tainted food and prompted Chinese authorities to suspend imports of affected products.

“The incident is credit positive of Bright Food, which operates its dairy business through Bright Dairy & Food Co, a 65 percent Shanghai listed company and is one of China’s top three dairy producers by revenue,” Moody’s senior analyst Alan Gao said. . .

PGG Wrightson take $321M charge on goodwill, operating earnings drop on drought:

PGG Wrightson, the rural services company controlled by China’s Agria Corp, took a $321 million charge to write off goodwill from its 2005 merger while posting a decline in operating earnings in line with guidance on the effects of this year’s drought.
The net loss was $306.5 million in the 12 months ended June 30, from a profit of $24.5 million a year earlier, the Christchurch-based company said in a statement. Sales fell 15 percent to $1.13 billion. Stripping out the impairment, net profit would have been $14.6 million, missing First NZ Capital expectations for net earnings of $19.4 million. . .

‘Broccoli lady’ honoured for kumara work – Tennessee Mansford:

A Kiwi woman’s just been named Australasia’s marketer of the year for her work to promote the humble kumara.

And it’s not the first time American-born Lisa Cork has made headlines with her vegetable antics. Twenty years ago she sent 10 tonnes of broccoli to US President George Bush.

It was labelled broccoli-gate or the broccoli brouhaha, and it all stemmed from one statement by then US President George Bush, Sr in 1990. . . .

Giesen The Brothers Pinot Noir 2011 wins top trophy:

Growing recognition of the calibre of Marlborough Pinot Noir has been highlighted with Giesen The Brothers Pinot Noir 2011 winning top accolades at the 2013 Spiegelau International Wine awards dinner in Auckland on the weekend.

Produced from the sought after Wairau Valley in Marlborough, The Brothers Pinot Noir 2011 won gold and then went on to win the overall trophy for Singapore Airlines Champion Pinot Noir.

Marcel Giesen said Giesen Wines is now focusing considerable attention on Pinot Noir, having planted their first 100% organic Pinot Noir vineyard only three years ago. . .


Rural round-up

August 9, 2013

Fonterra welcomes New Zealand Government’s confirmation of safety of New Zealand dairy products

Fonterra today welcomed the New Zealand Government’s confirmation that the quality issue involving whey protein concentrate is confined to the products made from three batches of WPC80 and no other New Zealand dairy products are affected.

Fonterra Chief Executive Theo Spierings said: “Public safety is Fonterra’s number one priority. When we informed our customers and the Ministry for Primary Industries of the quality issue, we advised them that it was limited to three batches of whey protein concentrate.

“We appreciate the New Zealand Government confirming this to be the case and reiterating the safety of all other New Zealand dairy products, including Whole Milk Powder (WMP) and Skim Milk Powder (SMP), butter and cheese. . .

Surprised by the biosecurity issue - Bill Kaye-Blake:

The issue with botulism bacteria in Fonterra’s whey powder has been in the news all week. There’s been lots of talk of milk prices, exchange rates, marketing images and damage to brands. Most of it is fairly simple. A lot of it, at least over the weekend, was speculation about what could or might happen — filler more than news.

I have one small note to add. I have been working in agricultural economics in New Zealand for the last ten years, all across the sector. Dairy, sheep/beef, apple, kiwifruit, potatoes, forestry, wine, lettuce — lots of different products. I’ve also worked on many different issues: trade, technology, consumer trends, productivity. One area in particular has been biosecurity, which in New Zealand refers to keeping bugs out (in other countries, it refers to biological terrorism, which led to some confusion once when I visited the OECD). . .

Fonterra says no sign yet of losss of business, too soon to count cost:

Fonterra Cooperative Group hasn’t seen any signs of customers reducing their business and says it is too soon to say whether the costs of dealing with the contamination will result in a charge against earnings.

Chief executive Theo Spierings told a conference call today that with listed units on the NZX, Fonterra has obligations to disclose any significant financial impact. Major customers hadn’t signalled as yet any change in demand, he said.

On the conference call chairman John Wilson fronted the media for the first time since the crisis emerged last weekend and defended why it took him this long to appear in public on the issue, saying “in reality this is an operational matter” and he had faith in Spierings’ management team to handle it. . .

North Canterbury will boom on back of water storage

IrrigationNZ says North Canterbury will be revitalised on the back of the Waitohi Irrigation and Hydro Scheme, which was granted resource consent this week.

“Hurunui District, like many other rural areas, has experienced gradual population decline and subsequent school and local service closures over the past 20 years. The announcement that Hurunui Water Project’s Waitohi Irrigation and Hydro Scheme can now proceed has the potential to completely reverse North Canterbury’s fortunes,” says IrrigationNZ CEO Andrew Curtis.

“The supply of reliable water will create certainty which will encourage greater investment in a range of land use options. With North Canterbury’s unique climate allowing a wide range of crops to be grown, the district is well placed to experience an economic boom,” says Mr Curtis.

Mr Curtis says environmental concerns around intensive farming and increased irrigation would be taken care of through audited farm plans. . . .

Rural Contractors welcome new workplace safety reforms:

Rural Contractors New Zealand (RCNZ) says it welcomes the government’s newly announced workplace health and safety reforms.

“Both employers and employees have an important part to play in improving safety in the workplace,” says RCNZ president Steve Levet.

“Unfortunately, the attitude towards ensuring workplace safety is not universal in the agricultural scene and it can be a battle to get safety seen as a priority by every individual.”

He says rural contractors and their staff need to be as vigilant with maintaining their own safety in the workplace, as they are with maintaining their machinery. . .

Local yarn’s luxury fibre reaches US Vogue Knitters:

With the resurgence in hand knitting and all things handcrafted, a local yarn company is spinning a name for itself with its luxury natural fibre yarn product especially for hand knitting.

Wellington company, Woolyarns New Zealand, produces an exclusive range of luxury yarn brands for both the textile manufacturing and hand knitting markets internationally.

It is Woolyarns Zealana hand knitting yarn, that has now attracted the attention of Vogue Knitting USA magazine’s Chief Editor. . .


Rural round-up

August 8, 2013

Fonterra launches probe into food scare:

Fonterra Cooperative Group, the world’s biggest dairy exporter, has launched an investigation into a food contamination scare after accounting for the potentially tainted product.

Chief executive Theo Spierings told a briefing in Auckland all affected whey protein and its derivatives had been contained internationally, and he was satisfied the contamination scare had stabilised. The dairy company has launched an investigation into the “human error” that caused the failure, and introduced extra testing until the probe is completed, Spierings said.

“An internal investigation has already started and it’s also likely that we will go for an external investigation,” Spierings said. “Fonterra will keep everybody in the loop and informed of our findings.” . . .

Conclusion of NDRC investigation

Fonterra Co-operative Group today confirmed it has been issued with an administrative fine of approximately NZD 900,000 (RMB 4.47 million) following the conclusion of the China National Development and Reform Commission (NDRC) review of pricing practices in the mainland of China for consumer dairy products.

“Fonterra has been co-operating fully and openly with the NDRC throughout this process. We accept the NDRC’s findings and we believe the investigation leaves us with a much clearer understanding of expectations around implementing pricing policies which is useful as we progress our future business plans,” said Kelvin Wickham, President of Fonterra Greater China and India.

“We understand that a number of companies in the dairy industry were fined, with Fonterra’s fine being in the lowest range.” . . .

To change perceptions farmers need to connect – Milking on the Moove:

It’s a perception Issue

I often hear people in the agricultural sector say things like “We need to remove the emotion from the issue” or “It’s a perception problem”.

We will never remove emotion from decisions, because everybody forms judgments based on their emotions, past experience and prejudices.

People make snap judgements

Malcolm Gladwell wrote a book called “Blink”. In his book he outlines research that shows people make judgements on a person, product, brand based on very small amounts of information.

He says that once a judgement has been made, a person is unlikely to change their mind. . .

Stress on Rural Business Prompts New Initiative From Business Mentors:

Business Mentors New Zealand has announced a new initiative to increase business mentoring support to rural businesses throughout New Zealand, which are facing increasing levels of stress worsened by the aftermath of the recent drought, tighter regulations on health and safety, and environmental controls.

The new initiative supported by the Ministry of Business, Innovation and Employment sees the $150 Business Mentors’ registration fee waived for businesses in areas where a medium-scale drought was declared. The country’s 17 Business Mentoring agencies are being encouraged to place greater emphasis on supporting rural enterprises. . .

‘I’d never buy Fonterra milk,’ says man purchasing three bottles of Anchor – The Civilian:

A man at a local supermarket has told a 17-year-old cashier that he would “never buy Fonterra milk,” particularly after this week’s contamination scandal, and said that this is why he’s made the conscious decision as a consumer to purchase Anchor milk instead.

The man, 29-year-old Brandon Gray, said he was “pretty savvy” when it came to selecting his products, and he wouldn’t let Fonterra’s domination of the dairy industry prevent him from expressing his disapproval of their operations. . . .


Apology and explanation

August 8, 2013

Fonterra CEO Theo Spierings is back in New Zealand with an apology and an explanation:

Fonterra Chief Executive Theo Spierings today apologised for the anxiety caused over the past few days by the quality issue involving three batches of potentially affected whey protein concentrate (WPC80).

Mr Spierings briefed media in Auckland today about why Fonterra alerted regulatory authorities, customers and the public about the product, and provided a detailed overview of what happened following its manufacture.

“I understand the anxiety this issue has caused over the past few days and I apologise for this, particularly to mums and dads around the world.

“Food safety and public health are the top priority for Fonterra, and all parents and consumers have the right to know that their products are safe.

“On Friday 2 August, after a period of extensive testing we concluded that we had a potential food safety risk. The tests showed that this risk was minute but, that it was a risk nonetheless.

“For this reason, we immediately informed the Ministry for Primary Industries, our customers and the public even though we did not have all the information about product location on hand. Our priority was to alert people to the potential risk as we continued to gather facts and, along with our customers, identify and contain affected products,” said Mr Spierings.

Over the past few days Fonterra, regulatory authorities and Fonterra’s eight customers have located and secured products that were not in the market, and where they had already reached retail shelves, initiated recalls.

“I appreciate the way our customers and their local regulators have worked so quickly with us. Their fast actions and commitment to safety have meant that almost all products are now secured – and we are in the final stages.”

Describing the low risk involved, Mr Spierings said that Clostridium botulinum needs to remain in an anaerobic environment to survive: “When exposed to oxygen, Clostridium botulinum does not survive and, for this reason, it is not commonly tested for in dairy manufacturing.

“The discovery of this particular form of Clostridium will be the subject of discussions with regulatory authorities and our own technologists about requirements for future testing regimes and quality regulations.”

Mr Spierings said Fonterra will be conducting a comprehensive internal investigation to fully understand what happened, both before and after the affected whey protein concentrate was manufactured.

“Our priority is to focus on dealing with the current situation, following which we will conduct an extensive audit into what happened and what can be done differently in the future.

“I believe Fonterra has acted in a responsible manner, with public health at the forefront of our minds throughout,” Mr Spierings said.

Had communication been this clear and full from the start there would have been a lot less anxiety.

The company is right to have public health at the forefront of its mind but that doesn’t exclude having a good public relations strategy too.

The media abhors a vacuum and if it isn’t getting the good oil from the prime source it will go drilling elsewhere.

Since the news of the contaminated whey broke I’ve read and heard interviews with all sorts of experts giving their views on what might have happened.

All left me with more questions.

Had Fonterra got its media strategy right from the start the answers would have been given before the questions were raised.


Food safety and integrity of exports priority

August 6, 2013

Federated Farmers dairy spokesman Willy Leferink says honesty is the only policy with food safety.

I think it’s worth reading in full but have highlighted the really important points:

Last Friday I sat down with my wife and planned our weekend. As we are about to be hit by that farming tsunami called calving, this picture of farming domesticity meant this past weekend was likely going to be my last of relative freedom until Boxing Day.

Then Federated Farmers communications team called me with the kind of bad news you don’t want early on a Saturday. A Fonterra media release indicated that in a batch of whey was the potential presence of a strain of Clostridium botulinum.

We need to remember that no one is sick and this recall stems from Fonterra’s product testing. If you want, Fonterra blew the whistle on Fonterra. Another thing we need to remember is that the volume involved is a fraction of the 2.5 million tonnes Fonterra produces each year. When I mean fraction, the 38 tonnes involved represents 0.0015 percent. But just as a miss is as good as a mile, the tolerance for C botulinum is rightly zero.

Yet this also means 2,499,962 tonnes of Fonterra produced product is unaffected. Getting that message out is vital in order to get our dairy products moving again.

As farmers like me own Fonterra, few people can comprehend how proud we are of what our cows, farms and company produce. You may see milk as a weekly staple but it takes an amazing amount of work to produce a quality product which has so many applications. The product in question, a whey protein concentrate known as WPC80, is used in products like infant formula, growing up milk powder, as a calf milk replacer and even in sports drinks.

Federated Farmers has talented people and our Food Safety spokesperson, Dr William Rolleston, is a sheep farming medical doctor and biotechnologist. Speaking to William, it seems Fonterra’s discovery of C botulinum is the laboratory equivalent of a needle in a haystack. I appreciate that is cold comfort right now.

Farms are the first link in the production chain because what we produce is collected and processed under strict sanitary standards. This is not lip service but an ingrained process starting well inside the farmgate. If there is any break in this pasture to plate chain then product does not go, or rather, that is how things are meant to work.

We are here because of that single unsanitary pipe at Fonterra’s Hautapu factory. There will be a reckoning but now is not the time; the ‘who, what, why, when, where and how’ questions come later. Right now we owe it to our consumers here and abroad to give them facts and not speculation. We owe it to them to communicate truthfully and in a format they will understand.

Contrary to popular opinion most of those bags of powder you may see in the news are produced to specification. Fonterra is directly plugged into major global supply chains and this is why being open and transparent counts. While the presence of C botulinum is serious, what we do next, matters. No matter how tough it may seem, being unambiguous, frank and accessible need to be guiding principles in how we communicate.

This started Friday at midnight when Fonterra blew the whistle on itself. Now the most urgent thing is to remove uncertainty in the wider market place.

That means identifying the products and companies involved in the recall. Of the eight customers, we welcome that Nutricia Karicare, Coca-Cola, Danone, Wahaha Healthfood as well as the local animal feed business, NZ AgBiz, have all stood up. Good on them. We must ensure that our consumers, wherever they are, have easy access to all the facts and in a format and language they understand. If you are a consumer and have concerns then please call the consumer number likely listed on the tin, bottle or container you are holding.

This is why communication channels must be kept open for the Ministry for Primary Industries as the regulator, Fonterra as the processor and the companies who used WPC80. Our only priority must be food safety and the integrity of what we export. Integrity is communicating facts openly and transparently and this is thankfully happening.

Fonterra’s PR team could learn from this voice of reason.

CEO Theo Spierings is right that human errors happen. The problem is the company doesn’t appear to have the communications strategy to deal with that.


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