Fonterra director Andy Macfarlane expanded on the reasoning behind the cooperative’s new strategy and structure.
Componentisation of milk is key to affordable nutrition for developing countries and a premium for eating whole dairy foods will have to be earned and paid.
Fonterra director Andy Macfarlane based his address to the Northland Dairy Development Trust virtual annual conference on this theme, while expanding on Fonterra’s new strategy and structure.
“It is a fallacy that we (the New Zealand dairy industry) want only to feed 40 million of the wealthiest people,” Macfarlane said.
“Diversified diets in the developing world will have to partially offset higher demand for protein in the developing world.
“Global demand for protein, carbohydrates and essential nutrients is going to continue to rise with the growing world population.
“But essential nutrition is much more complex than a simplistic debate around protein, carbohydrates and sugars.”
Foods will be categorised into medicines, nutrition, wellbeing and food for pleasure.
A premium for eating whole dairy foods will have to be paid and NZ will have to verify what it stands for and market those values.
On these assumptions, Fonterra is basing its processing form and function and capital allocations, he said.
It needs the ability to switch product lines and markets in response to customer demands.
Also, the ability to extract high-earning components from the raw milk supply.
It needs to be moderately geared to reduce fixed overheads and have committed capital for stability.
Fonterra needs scale to manage risk and diversify economically.
Macfarlane extolled the benefits of collective (cooperative) capital because other ownership forms have big challenges.
At the farm level, NZ had systems that were less fragile and monocultural than other countries.
“Many of our soils are alluvial and loessal, but we have great water resources, a temperate climate and a low dependence on imported feed,” he said.
He warned against an overdependence on artificial nitrogen and palm kernel expeller.
The alternatives were clover-fixed nitrogen and maize, silage, lucerne and fruit waste.
He asked if NZ needed gene editing and cysgenics to enhance the natural attributes and resilience of pasture plants, while solving significant environmental challenges.
“Can we make dairy farming more people-friendly, as a greater proportion of those in the industry are employees, not owners?” he asked.
“How do we resolve real and perceived notions around animal welfare?”
In conclusion, he said Fonterra’s strategy is based on collective capital, effort, knowledge, global networks, science capability and risk management.
“We are deepening our research and ability to differentiate, extract and create value from the components of NZ, nutrient-dense, pasture-based milk,” he said.
