Second-generation dairy farmer David Geddes has grave concerns over corporatisation creeping into the industry.
He was staggered at the rate the Fonterra dairy co-operative had lost connection with its grassroots family farmers and feared for the future of the industry for generations to come.
Geddes was concerned the successful battles fought to retain the co-operative structure of the dairy industry when Fonterra was established in 2001, were now at risk.
It was a structure that until now had served both dairy farmers and New Zealand well.
The story of the dairy industry was the story of NZ and he doesn’t dispute it had been a good one.
But being passionate about cows and the young people in the industry Geddes, a former Federated Farmers dairy chairman and chairman of the Industry Training Organisation (ITO) for many years, feared the loss of the farmer-owned and controlled co-operative if its governance was not pulled into line.
Heading into the third season of depressed farmgate returns the dairy downturn had challenged leaders to think more deeply about the future and how to realise more value from the attributes of grass-fed milk.
Geddes acknowledged the relentless need for change was hard on organisations, but he said it was harder on farmers.
Geddes established his farm in 1975, the young entrepreneur moving from the family’s dairy farming roots near Lincoln, to Willowby in mid Canterbury.
He had grown up with dairying, his father served 30 years as a Dairy Board director and he had learned the value of turning grass into milk.
He started milking 170 cows and supplied the then Midland Dairy Company.
“There were only eight suppliers and each of us was milking less than 200 cows.”
His family’s Willowby farming operation now milks 700 cows on 250 self-contained hectares in fully shared up Fonterra supply.
“My capital is tied up in growing grass. My family survive on growing grass but we are at risk of a sustainable future under corporate takeover.
“We are at risk of losing the mix of farmer skills available to the (Fonterra) board.”
Geddes suggested there was a disproportionate focus on growing money from money at the expense of growing grass to produce milk as the saleable product.
“We need co-operative governance not corporate governance. Before us is a proposition where the board identifies their personal needs.”
That was straying from the purpose and principles of the co-operative model, Geddes said.
“The strength of the co-operative is the most important consideration for the future prosperity of our dairy farming sector and through that, the future of NZ.”
Geddes cited the pre Dairy Board days when there were no markets and farmers were fighting on the street to sell milk.
The formation of the NZ Dairy Board in the 1930s and its associated legislation gave guaranteed certainty, milk price was 10% up or down 5% in any one year and retentions built the dairy industry from the bottom up.
“Farmers knew where they were and farmed accordingly. As farmers actually farming we have lost that confidence under threat of corporate governance.
“Corporates are taking over the confidence in supply and it’s all based on shifting finances around in the need to get return on capital that’s focused on making a dollar on a dollar and that’s clearly different to a farmer turning grass into milk to maximise his capital investment,” Geddes said.
Fonterra had lost its connection with the farmers, it had become a little unstuck and some tweaking was needed, he said.
“We need to make a case for the improved representation of the governance, to retain farmer ownership and control, and to maximise payout through strength in the market.
“Representation needs to come from the owners (farmers) up.
“We need co-operative governance not corporate governance. We need the co-op strength in buying and selling, and we need the right signals coming from the product.”
“I could say bugger it, throw my arms in the air and walk away. I know many my age who have.
To keep the farmers in the right space Geddes suggested the shareholders’ constitution needed a “beef-up”.“We need co-operative governance not corporate governance. We need the co-op strength in buying and selling, and we need the right signals coming from the product.”
“We could debate this until the cows come home but the bottom line is Fonterra is the biggest and best business in NZ because of its co-op ideals and that we do not want to lose.
“We need to prove now that the future of the dairy industry is in the strength of the co-operative under farmer ownership and control and we must ensure that farmer ownership and control is maintained into the future.”
As for the futures market, Geddes said like most farmers he was struggling to come to terms with any benefit and personally he was not excited.
“It’s pretty much another fight for capital.”
Under corporatised structure the connection was lost with farmers and for anyone to gain a lot of money someone had to be on the losing side.
“And that’s the loss of co-op control and ultimately loss to the farmer,” Geddes said.
He also slated Livestock Improvement Corporation’s (LIC) proposed changes suggesting changes to the co-operative’s capital structure would leave farmer owners with the core livestock breeding and the value generations of farmers had built up in the company would be lost to the hands of outside investors.
At 67 years young Geddes said he was in a position to walk away.
But he was passionate about cows, the industry and deeply concerned for the future of young grassroots people in the industry.
“I could say bugger it, throw my arms in the air and walk away. I know many my age who have.
“But I couldn’t do that because I am so passionate about the future of a sustainable industry for generations to come,” he said.
