Friday, March 29, 2024

Lessons for the future

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While there might be many reasons for New Zealand dairy farmers to want to forget 2015, there have been some lessons they’d be foolish not to remember well for future reference.
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Volatility has to be top of the list. When dairy industry leaders warned this was the new normal a few years ago many would have doubted them and believed the stars would surely align for a more settled future. That hasn’t been the case and the possibility of it happening any time soon looks more and more remote.
The ups and downs of the latest GlobalDairyTrade auction give a very precise indication of where the market sits, just as it was intended to. But as soon as one international event affecting milk supply or demand wanes another appears. And this season has seen multiple factors in play all at once, linked to political events which like it or not form links stretching right back to NZ dairy farms.
Dairying is part of the global marketplace talked about decades ago, which didn’t look very likely then as national barriers remained and with them trading restrictions. But more and more overseas investment is occurring, both in NZ from offshore and by NZ dairy companies in markets where prospects look bright. While the first-mover advantage is very much to the fore, staying power is often more important when it comes to boosting income streams and a good rate of return on investment.
In 2015 the Trans Pacific Partnership agreement (TPP), agonised over around the world and the subject of many protest marches and inflamed debates, was delivered. Like it or loathe it, TPP maintained the momentum of the free-trade movement where this country has been so instrumental in persuading other nations they have everything to gain and perhaps not as much as they would worry about to lose. Dairying might not initially have been seen as a big winner but it’s certainly better placed now to build on new market relationships in the years to come.
It’s to be hoped that whatever the ongoing global consensus on climate change mitigation, NZ is delivered a similarly sloping playing field.
Representation and governance got a good going-over in the past year, particularly at Fonterra. It can be argued that when the payout is low the heat is likely to go on those delivering the unwelcome news. But calm decisions need to be made at the right time. Directors and shareholders alike seldom make their most sensible decisions in haste.
Fonterra learned its lesson with its initial capital restructuring plan in 2006 when there was such an outcry the proposal was withdrawn. It isn’t about to let that happen again and for that its farmers should be thankful.
But it must show shareholders it’s not just tinkering around the edges of the issue, particularly after the wide support for the Gent-Armer resolution put forward at its annual meeting for a slimmed-down board as a way to greater efficiency and earnings.   
Farmers want to know their representatives have the tools to act in their best interests. It never should be forgotten that both milk supply and directors’ votes can always be taken away.
Farmers will look to the Fonterra Shareholders’ Council to take a leading role on their behalf, as it was designed to do. While it’s great when behind-the-scenes discussions deliver outcomes which mightn’t have been possible in the full glare of public gaze, it’s also very important that farmers see the FSC at work on their behalf. Once again votes can be removed, farmers can simply switch off or, reverting to old behaviours can start bothering their local Fonterra director about issues that their councillor should be listening to. Engagement through the correct channels is everything, something not to be forgotten in the ongoing review of the Dairy Industry Restructuring Act.
The value of what the dairy industry has put in place in the past always needs to be remembered. Sadly, that often happens with the passing of former leaders who championed causes to benefit those who came after them.
2015 saw the loss of LIC’s inaugural chairman, David Bay, as well as David Milne, the well-known Westland dairy farmer who held that position from 1996 to 2004. Bay also served on the New Zealand Dairy Group of Companies’ board and the Dairy Board while Milne was a director of Westland Dairy Company and also a founding director of DairyNZ until his retirement in 2010.
Another Dairy Board director, Mac Gordon, was also remembered for his huge contribution along with his close-to-home roles in Northland dairy farming and processing.
The lesson they leave is that without farmers’ willingness to step up and into industry positions dairying would be much the poorer. Worse still it would be much less able to face whatever coming seasons and world events sling at it.

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