I was stunned recently to see farming leaders being interviewed about the last GDT crash and all reacting along the lines of “We can’t do anything about it. The market is what it is.”
Pardon?
A week before the auction of April 1, Fonterra announced it was going to put extra product on GDT. Straightaway, the dairy futures dropped 10%. We set the market.
There is only one solution. We need to take control of our destiny, which means in times like these, getting control of the milk supply in New Zealand.
Don’t expect anything from the Fonterras and Open Countrys of this world. Their job is to run plants efficiently and create value/dividends.
Enabling milk price to go up, say, $1 and losing 30 cents dividend is not their prerogative. We are the slaves and it is time we became the masters.
How are we going to do this?
Firstly, in times like these the GDT needs to be halted.
The current masters can learn something again from the sheep and beef farmers who are so good at their Sunday night bartering.
And, indeed, individual farmers can’t halt the GDT. This has to come from the (currently weak) Fonterra Shareholders Council.
This council will have to start the revolution.
Secondly, this council will have to force the board and chief executive to come out with a guaranteed milk price for 80% or 90% of last year’s production.
If farmers are happy to produce more, they have to be price takers.
Thirdly, the council has to demand a stop to Fonterra creating milk pools around the world. It is of no use to NZ dairy farmers.
Fourthly, the council will need to force the board and chief executive to do a rethink on Fonterra’s strategy.
It is shocking to read the intention to use NZ milk increasingly for producing commodities and Australian milk for producing value add. Read: NZ milk is cheap and in Australia Fonterra has to compete hard for milk.
If we had been French there would have been thousands of tractors in Auckland at Fonterra’s head office and we wouldn’t have left until Theo (Spiering) gave an undertaking to give us a fair crack at value add.
Russell Norman was right after all, we need more strings on our bow, we need to stop this run to the bottom, we need to value add here in NZ.
You wonder why I am passionate about this as an Open Country supplier? I left Fonterra in 2009 after it changed share requirements (yet) again.
What was to be a three-year process buying shares for increased production got changed to paying up fully in year one when GFC hit.
Fonterra was protecting the business, so was I.
I am adamant that Fonterra’s performance is important to Open Country suppliers. OCD will pay only enough for us to stay.
At the same time I am adamant that the OCDs, Tatuas and Synlaits of this world need to be a thorn in Fonterra’s side.
Fonterra needs that to stay honest and focused.
I will have no show demanding from OCD to guarantee me a milk price for a percentage of my production. A co-operative can do it.
Another reason why I am passionate about it? I grew up in Holland seeing the effects of the quota system.
After it was implemented, farmers couldn’t believe how much income they could make by becoming more efficient, within the annual quota.
Here is a message for NZ farmers: the average NZ farmer with the average NZ cow over a whole lactation converts 15kg DM into 1kg MS.
The range for farms is in the vicinity of 10kg to 20kg DM per kg MS. I guess the range for cows to be eight to 40+ kg DM per kg MS.
Just imagine producing 90% of your production with 75% of your cows, further enabling you to buy less supplementary feed, less N, graze off less stock and get a higher payout.
Don’t get me wrong, I am not advocating a quota system.
We are dealing with a supply/demand imbalance and I am advocating developing a method to effectively curb supply.
The imbalance will disappear but it will be back in another year.
Please let us have a tool we can grab off the shelf to take control of our destiny next time.
Fonterra’s board and chief executive have no focus on milk price any more. Please start ringing your shareholder councillors and don’t stop until you get what is necessary in these dark times – milk supply control.
