“One of my key concerns is fragmentation of the industry. I do believe competition is good, but not at the expense of the industry.
“We need to ensure we have a strong co-operative that leverages its scale and efficiencies, which will provide relevance in the marketplace. Without volume in the markets we are operating in, it will be hard to obtain value as we won’t have the market penetration required.”
To retain supply, Coull said Fonterra had to execute and deliver its strategy to drive better performance, while maintaining a strong milk price. It had to continue to leverage off the scale of the co-op to compete on value and performance, and deliver a strong dividend return.
“Fonterra should have to perform in order to retain supply, that’s a given. Continuing to develop our value-add products and off-shore markets are key to this, but scale is vital in this space.”
Coull, appointed to the deputy chairman’s role in June, said the Australian dairy industry was one example where competition within the market place had been at the expense of farmer returns
Likewise, corporate dairy companies attracting milk supply away from Fonterra wouldn’t be to the benefit of farmers.
“If you’re part of a corporate you have no influence on the future of the industry, you take what you can get.”
Corporate dairy companies wouldn’t give farmers any vote on the future of the industry, a vital position which was obviously lost on a good number of Fonterra shareholders given voter turnout at last year’s director elections, he said.
Voter turnout ranged from 25% to 55% across the regions, which wasn’t good enough from the owners of the business.
“Farmers have to control their destiny. Do you want to be in control or be controlled?”
Farmers had become less engaged with the co-op in the past few years and it was vital to improve that relationship.
“A lot of farmers are quite ambivalent about what’s going on in the co-operative and that’s a real concern. For a lot of farmers, the connection with the co-operative left with the tanker every day and arrived back with the milk cheque a month later.”
The Shareholders’ Council had to help turn things around and build a stronger two-way connection between farmers and their co-op, he said, which would start with a greater understanding of the Fonterra business.
‘I’m still a firm believer that farm ownership is achievable. But as farmers we have to make sure our industry is vibrant and we allow for progression.’
It was the council’s role to understand and articulate business fundamentals back to farmers to try and lift understanding of the business, he said.
Coull, 42, was raised on a 70-cow dairy farm in Taranaki. He married Julie at 21 and they went 50:50 sharemilking for five years before buying their first farm in 2000.
In 2002, they moved north to Waikato and bought 82ha effective on the northern side of Otorohanga. The System 2 farm milks 270 cows and produced 89,184kg milksolids (MS) last season.
The couple bought another 80ha farm at Waitomo in 2007, which they increased to 142ha this season. Now milking 430 cows, the farm was on target to produce 130,000kg MS.
Ten years ago Duncan was employed as a rural banker for Rabobank and later started his own rural consultancy business. He first ran for Fonterra Shareholders’ Council in 2010, and this year was elected unopposed to the position of deputy chairman.
After four years on the council, including two on the leadership team, the deputy chairman role felt like a natural progression, he said.
Julie and his two sons, Dylan and Cameron, supported him in his new role and he was grateful for the sacrifices they made to allow him to be on the council.
‘If you’re part of a corporate you have no influence on the future of the industry, you take what you can get.’
It was vital for the future of the industry that younger farmers made the effort to put their hands up for these leadership roles, he said.
“It’s about giving a bit back at a time when the industry is quite relevant to me. As a young farmer, I probably took for granted how much the strength of the industry underpinned the confidence others had in our business.”
The council was a valuable mechanism for shareholders because of its constitutional role in monitoring the Fonterra board of directors, ensuring farmers received the greatest possible return, and representing farmers’ views to stakeholders within Fonterra and the wider industry.
Julie and Duncan have employed contract milkers on both their home farms, Jacob Van-leirop and Wade and Angela Matthews, who were a key part of their business and had allowed Coull to be off-farm.
It was important to provide opportunities for wealth creation, he said.
“Julie and I are both quite focused on progression. We have been given opportunities and we want to ensure our partners in our business get to progress.
“I’m still a firm believer that farm ownership is achievable. But as farmers we have to make sure our industry is vibrant and we allow for progression.”
Providing those opportunities had become more difficult in the past few years.
The industry’s competitive edge had always been its ability to deliver profits from the temperate climate farming off the grass curve, but in the past 10 years debt levels, combined with higher operating costs, had eroded potential returns for some.
Farmer debt had doubled from $11/kg MS to $21/kg MS, which was often caused by farmers capitalising milk price and profit into land.
