He was explaining the benefits for the company and its suppliers after Fonterra and the Ministry of Foreign Affairs and Trade announced their agreement to work together to help developing countries build viable dairy industries and increase dairy nutrition knowledge.
Under the partnership, called Framework for International Development in Dairy Excellence, Fonterra and the ministry would develop initiatives to raise onfarm milk safety and quality standards, increase farmer productivity and profitability, build co-operative governance, improve milk collection and transport, and develop educational nutrition programmes with local communities.
Fonterra already had a strong relationship with the ministry on trade and political issues. On the dairy development side the relationship was becoming increasingly close.
The co-op would focus on markets where it was building a significant consumer presence and strengthening the support it could give to local dairy farmers and communities.
Sri Lanka, Indonesia and Myanmar were the main countries where the partnership would be working initially. Fonterra’s strategic interests there gelled with the aims of NZ’s aid programme.
In the past the Dairy Board and Fonterra had mainly been commodity traders, Turner said.
China, Indonesia, Malaysia and Brazil were among the dynamic markets where Fonterra was developing a more mature business.
“These days we’ve got the world fastest-growing food market in Asia, right on our doorstep, which wants our product, is relatively open to trade, and where we are building quite sophisticated portfolios of consumer and food service products.
“To run a proper business in markets like those Fonterra had to be seen giving back to their communities and ensuring its stakeholders were supporting the company being there.
“At the end of the day without an export market we’ve got no business and we are in those markets at the pleasure of the local governments, so we can’t just sell our product and expect them to be grateful – we’ve got to work harder at making ourselves part of the community and giving back a bit to those communities in order that we preserve our licence to operate
“It’s both commercially sensible and it’s good for the dairy industry and the public in the countries in which we operate.”
Onfarm work done under the programme will differ from country to country.
‘They like to see production go up but often that’s not necessarily the best thing to do because it doesn’t create a sustainable business.’
Fonterra’s biggest overseas dairy development area is China, where it has large farms and large staff numbers, about 250 a farm.
In contrast, in Sri Lanka it is increasing its milk supply significantly through contractual arrangements with about 2000 local dairy farmers.
“We want to work with the local smallholder farmers through extension training to improve production, productivity and quality onfarm so the volume and quality of milk that goes into Fonterra’s business is improved,” Turner said.
A combination of New Zealanders and Australians are working hands-on with local farmers, down to trimming hooves, checking teeth and dealing with issues like feed and water.
Food safety was critical to everything Fonterra did but the development work was also about ensuring that farms were sustainable environmentally and economically
People from non-government organisations typically concentrated on inputs by giving out cows, Turner said.
“They like to see production go up but often that’s not necessarily the best thing to do because it doesn’t create a sustainable business,” he said.
“We want to work with farmers across the whole chain – look at a total management view of the business, understand profitability as well as sustainability, so in some cases that might mean advising a farmer to have fewer cows but feed them better.”
The partnership could work in a huge list of countries, Turner said.
Fonterra operated in 140 countries, and whenever company directors or top executives went offshore they tended to meet politicians and industry leaders who asked them to build a drier or a farm or give them a thousand cows.
“One of our problems is how to respond to those requests without disappointing everybody,” Turner said.
“We need a very clear set of priorities that are agreed with our shareholders and board and are of interest to MFAT so we do things in a focused way.”
It made sense to align Fonterra’s and the dairy industry’s commercial objectives with work the Government was trying to do through its aid programme, Turner said.
“We think there is a lot of complementarity and synergies and we get more bang for our bucks by doing things together.”
