Archive for the ‘Fonterra’ Category

Ham-fisted definitely, incompetent possibly

March 25, 2016

Fonterra’s succession of ultimatums to its suppliers smack of ham-fisted bullying and incompetence. The company’s first ultimatum was to push payment terms out to 90 days for a ‘small percentage’ of its New Zealand suppliers in line with its global practice , followed by an invitation to attend Dragon’s Den type negotiating sessions in which it has served notice it will demand 20% price reductions. (more…)

Fonterra makes best of a bad job

March 24, 2016

The PR spin has been pretty active signalling a much improved half yearly result which was duly delivered this morning. The company confirmed a 40 cent dividend for the full year with the interim dividend being paid next month as usual and the final dividend being paid in two tranches in May and August instead of October. (more…)

MPI’s food safety responsibility still causing major problems

December 11, 2015

In January this year I wrote a column which argued the Primary Industries Ministry risked losing focus on two of its core responsibilities, namely food safety and biosecurity, as a direct consequence of merging MAF, NZ Food Safety Authority and Bio-Security New Zealand into a single mega government agency.

I cited the Fonterra whey protein botulism scare as an example of the new agency dropping the ball.

The WPC80 report into that incident stated “overall there was a lack of commitment to ensuring readiness to deal with a food safety event” quoting a senior official as acknowledging nobody had taken ownership of food safety.

The report went on to say the gap had since been closed.

Recent events like the Hepatitis A cases from frozen berries from China, antibiotic-resistant campylobacter in chickens distributed by three of the four largest North Island producers and last year’s outbreak of gastrointestinal bug yersinia suggest the gap remains open.

In the meantime, MPI maintains weeks or even months of secrecy before it discloses information about the identity of suppliers or the source of the problem.

Even worse, sometimes, as in the case of the yersinia outbreak, the named culprit is found not to be the source after all.

I argued at the time MPI’s four key areas of focus, as listed in its 2014 annual report, were as follows: maximise export opportunities, increase sustainable resource use, improve sector productivity and protect from biological risk.

It seemed then and still seems staggering that the most important role of all, protection from biological risk, should come last instead of first in this list of priorities.

In case people think this is just semantics, consider the benefits of the previous structure when NZFSA was split out from MAF in 2002 and run as a sole-purpose government department between 2006 and 2011.

NZ’s food safety reputation was at an all time high among our trading partners and I struggle to remember any serious food disease outbreaks, although I might not be entirely correct.

The food safety performance of the red meat sector still demonstrates the excellence of the standards put in place under MAF and NZFSA.

 

Unfortunately, the performance of Bio-Security NZ under MAF control was not as impressive during the first decade of the 21 st century, as kiwifruit growers hit by the Psa virus would testify.

The value proposition for the creation of MPI argued there was a risk of divergence in areas of regulatory policy and standard-setting, cost recovery and international standards.

Given NZ’s unique biosecurity and trade needs, the regulatory programme was not considered optimal for creating economic advantage for NZ.

However, the most important point of protecting NZ’s borders from biosecurity risks and consumers from food safety events appears to have been taken as a given, rather than disciplines requiring single-minded focus.

The National Government’s main objective has been to achieve greater efficiency and cost-effectiveness of outcomes by means of structural changes but there is a danger this focus might result in the baby being thrown out with the bath water.

I have read one comment which calls for the responsibility for food safety to be handed back to the Ministry of Health because its sole focus is public health.

The same writer also argues MPI has a conflict of interest between its priority to protect consumers and protection of food producers.

I would argue MPI’s main focus is not on producers but on economic gain for NZ, as shown by its first three areas of focus – export growth, sector productivity and sustainable resource use.

It is very easy to claim this is absolutely consistent with maintaining first-class food safety and bio-security but the point is MPI does have a conflict of interest.

Which of the four areas of focus should they concentrate on?

If the Government insists on doubling exports by 2025 while improving sector productivity and resource allocation, it isn’t difficult to see where food safety and bio-security sit in the queue.

I spoke to Labour’s primary sector spokesman Damian O’Connor about this issue in January.

He was adamant MPI is too big and has a conflict of interests between its regulatory and compliance responsibilities as well as its goal of maximising exports while the increasing quest for trade freedom is at variance with the protection of NZ’s biologically-based economy and reputation.

He wanted to see separate food safety and biosecurity agencies established outside MPI.

 

Unfortunately, I can’t see this happening before the next election at the earliest but it looks to me more and more as though we should evaluate this as an option.

At the very least we should assess the risks to NZ health and reputation of continuing as we are.

Silver Fern receives an offer it can’t refuse

September 30, 2015

No wonder the deal between Silver Fern farms and Shanghai Mailing took so long to conclude, but from all appearances it was worth waiting for. Not that you would necessarily think so, if you read about the disappointment of some shareholders and the MIE group about the board’s unwillingness to give serious consideration to an alternative farmer offer of $40 million or some of the business commentary. (more…)

Cooperatives and private companies work best in agriculture

September 14, 2015

Good company performance demands clarity of purpose which is defined and monitored by a board of directors elected or appointed by the shareholders. There are five main types of company ownership structure that are or have been represented in New Zealand’s agricultural sector and each has advantages and disadvantages. (more…)

Fonterra’s restructure more about poor strategy than milk price

August 6, 2015

When Fonterra was formed back in 2001, there was a great sense of optimism about the potential for a New Zealand dairy company to compete on a truly global scale. The industry’s infighting and parochialism would be a thing of the past and the clear intention was to use the greater efficiencies and scale to create a substantially better performing business model. (more…)

Agribusiness Agenda poses challenges

June 13, 2015

KPMG’s Agribusiness Agenda for 2015 is a comprehensive analysis of the challenges faced by New Zealand agriculture in meeting the government’s target of doubling exports by 2025. In the light of dramatically falling dairy prices with little sign of recovery, what was always a big ask has suddenly become a whole lot harder. (more…)

MPI risks loss of focus on food safety and biosecurity

May 26, 2015

Most people would almost certainly see the primary role of Ministry for Primary Industries as the protection of New Zealand’s biosecurity, food safety and primary production. The creation of MPI was designed to meet a number of objectives, one of which, probably the most important, must surely have been to ensure a world class agency to deliver this priority. (more…)

Unlikely lower dairy payout will lead to immediate land use change

May 2, 2015

Previous downturns or relative changes in sector profitability have generally led to a change of land use; and because sheep farming was the predominant 20th century rural activity, land use change was usually to a form of farming other than sheep. (more…)

Fonterra’s disappointing performance

March 31, 2015

Fonterra’s interim result announcement contains confirmation of the farmgate milk price forecast of $4.70, but a reduction in the added value dividend. (more…)