Friday, March 29, 2024

Palm kernel guidelines for product quality

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Fonterra chairman John Wilson has defended the co-operative’s stance on palm kernel and the timing of its guidance release but says he regrets that farmers didn’t appear to clearly get the message it was just that – a guideline.
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Many Fonterra farmers were upset at the release put out by the co-operative’s management three days before Fonterra’s annual results were announced along with the 75c/kg milksolids (MS) boost to milk price for the 2015-16 season.

At the time of the announcement farmers were still facing a $3.85/kg MS milk price and many were using the cheaper palm kernel to supplement poor pasture growth through a cold, wet spring.

The release caused anxiety, and a lack of information over what prompted the 3kg drymatter (DM)/cow/day guideline caused speculation. Farmers inundated Fonterra representatives with questions.

The release talked about the importance of preserving NZ’s pasture-based advantage but confused farmers because it gave guidelines only for palm kernel, not other supplements.

Wilson said farmers received more information in a detailed email a few days later and at a round of farmer meetings following the annual results release.

That’s where they were told the guidance had arisen because Fonterra had faced challenges with manufacturing processes for butter products in areas where very high levels of palm kernel were being fed to cows.

Wilson said the guidance didn’t come out of the blue and questions had been asked about palm kernel for a long period.

Fonterra had done its own research and testing and found the composition of milk from cows fed very high levels of palm kernel had an impact on its ability to manufacture some products and could make processes more expensive.

There were concerns that if use of palm kernel continued to grow so too would manufacturing issues.

NZ’s pasture-derived milk attracted a premium and part of the reason behind the guideline release was to preserve that premium already embedded in farmers’ returns, he said.

Management had come up with the guidelines and the board had discussed and agreed with them so it was important the information was relayed to farmers as soon as possible.

There was never a right time to release such information, he said when asked why the guideline wasn’t released following the milk price increase.

“We don’t sit here and manipulate information for our farmers’ sake. We give information to farmers as soon as we’ve made the decision, no matter what it is,” he said.

Wilson said he’d rather be hung for taking that approach than trying to “spin” information going to farmers.

The guidance was put out so farmers had plenty of time to think about their farming systems, particularly those placing longer-term palm kernel contracts.

No penalties were being put in place but the co-op was looking at developing a milk test for indications of high palm kernel use with the expectation the test would be ready next year.

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