Decision made, but important to find the cause

The Government decision to eradicate rather than contain Mp. Bovis has the merit of drawing a line under the first stage of the disease outbreak. There were three options under consideration: eradicate, manage or do nothing; the third was clearly not seriously considered, but there must have been a serious debate between the first two. In the end the eradication course of action was chosen because it gives ‘the best shot’ at eliminating the disease to the benefit of the New Zealand agricultural sector, particularly the dairy industry, and the economy.

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MPI’s SOPI report suggests it is on different planet

When I read the headline forecast in the December update of the Situation and Outlook for Primary Industries report, my initial reaction was “they must be joking, what planet are they on?” After a slightly more in depth study of their analysis, I am still baffled.

MPI’s food safety responsibility still causing major problems

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.

Livestock numbers forecast shows little change – unlikely to achieve MPI’s optimistic revenue forecasts

The Beef + Lamb New Zealand Economic Service’s latest stock numbers survey shows only minor changes in next season’s predicted volumes. However total sheep numbers are estimated to fall below 30 million for the first time.

MPI owes processors an explanation about Chinese green runner ban

The announcement by Silver Fern Farms of the reopening of its Finegand, Balclutha, casings plant eight years after it closed is an interesting example of history repeating itself. Of particular interest are the reasons behind resuscitating an operation which nobody would ever have foreseen as likely.

Meat quality in restaurants constantly improving

The quality of domestic red meat supply both to the retail and catering trade has improved out of sight in the last 20 years because of stricter food regulations and the introduction of the Quality Mark. It has moved up another notch over the last five years or so, particularly since the global financial crisis.

MPI must get balance right between regulatory function and growth

The rash of food scares and rejected shipments in recent months must inevitably raise the question whether MPI has become too big to do its job properly. What isn’t at issue is the crucial importance of a government ministry which has responsibility for regulating all agricultural, seafood and forestry exports and imports.

The botulism scare that wasn’t

So Fonterra’s botulism contamination problem wasn’t a problem after all according to the tests conducted by the Ministry for Primary Industries. It is most unfortunate that Fonterra got it so wrong that it felt the need to wear a hair shirt and submit itself, not to mention its own management, the government and the country as a whole, to the worst public relations disaster imaginable.

 

The original tests were carried out by AgResearch which still stands by its test results, but according to MPI’s tests by global experts, the whey protein contained a different gene from the Clostridium botulinum.

 

MPI took it seriously, the government took it seriously, Gary Romano fell on his sword and two managers have been dismissed. China was completely spooked by the prospect of infant deaths, while Russia and Sri Lanka have discovered an opportunity to place bans, temporary or otherwise, on New Zealand dairy production.

 

Infant formula manufacturers will have suffered untold damage to their businesses, from image, financial and future sales perspectives.

 

The damage to our image abroad has been incalculable. When newspapers all over the world take delight in writing headlines such as ‘100% Manure’ and question our right to promote our tourism industry on the back of our clean, green environment, one wonders whether we can ever recover from this single mistake.

 

The answer is that we will in time, but perhaps nobody will ever really believe the 100% Pure claim again, even if it was never meant to be taken literally.

 

Having said that, the recent spate of food safety problems, among them the apparent discovery of traces of chemicals which weren’t there, is not all that surprising when one thinks about it.

 

New   Zealand’s exports are massively weighted towards agriculturally based food products, all of which have the potential to pose more or less serious food safety issues. This is why MPI’s inspection regime is so comprehensive, although the dairy production problems may suggest to an outside observer that the systems in place are not as failsafe as they should be.

 

Only a couple of days ago Greens spokesperson, Stefan Browning, has called for MPI to stop the practice of allowing meat companies to carry out some of their own inspection procedures and revert to all meat inspection having to be performed by AsureQuality’s meat inspectors. Browning said the meat industry is potentially a comparable risk to the dairy industry.

 

Therefore it’s a great relief that the systems didn’t actually fail in the case of Fonterra’s dirty pipes. Someone who ought to know told me more than a week ago that there would be no traces of Clostridium botulinum found in the whey protein, so it all appears to have been a big fuss about nothing very much.

 

However there is a question as to whether all food safety has suddenly been compromised by a fall in standards caused by devolving responsibility to the companies which produce or process the food products. There is no evidence of a sudden drop in standards in spite of recent events, although conspiracy theorists will assume that independent Government employed inspection has been compromised by companies being allowed to inspect their own products.

 

In this case it was a test by AgResearch, a Crown Research Institute, that provoked the contamination scare, although presumably the product had already been cleared by Fonterra’s in house testing laboratory.

 

In the dairy industry there are 49 Approved Recognised Agencies including both independent testing agencies and company owned laboratories. This latest chain of events does not necessarily invalidate this testing structure.

 

There would appear to be potentially a long queue of people and organisations looking for compensation, including dismissed managers, infant formula manufacturers whose businesses have been undermined, Tourism New Zealand whose brand has been dragged through spilt milk powder and all those businesses which depend on our international reputation.

 

It is ironic that Fonterra has just announced its highest ever payout to farmers which will of course be great for the economy, but that might not be enough to compensate for the damage caused by the company’s PR disaster.

Fonterra problem highlights danger of being a one trick pony

It’s a change for the dairy industry to capture the negative agricultural headlines instead of the meat or kiwifruit sectors. Unfortunately for everybody in New Zealand the dairy industry has become such a critical and large part of our economy that the whey protein botulism scare has already caused, and will continue to cause, major concerns for our global dairy trade.

 

Only last week Fonterra was again the star of the economy with a $3 billion boost to farmers’ earnings because of a 50c lift in the payout. Yet this week the company’s very scale has been called into question. People are now asking whether Fonterra can survive its third health scare in five years.

 

Even if this is unnecessary scaremongering, another question which would have been unthinkable a week ago is being asked. Is Fonterra too big for the country or, to quote the Waikato Times, its gumboots? This ought to make those calling for one mega meat company hesitate for a moment, before they find that they are asking for something which may contain the seeds of its own destruction.

 

Fonterra is one of New Zealand’s few businesses of global scale, if not the only one, so it seems unduly critical to question its size. After all if only we had some more companies like it, it wouldn’t stand out as such an exception. Within the dairy industry worldwide, Fonterra is only one of a number of big companies, alongside Nestle, Kraft, Danone and others, but there are some key differences which make its and New Zealand’s position more sensitive to problems like this.

 

In spite of having substantial parts of its business in South America, Australia and China, it remains essentially a New Zealand company, synonymous with this country. The vast majority of the milk it processes comes from its New   Zealand farmer shareholders.

 

Unlike the other major dairy companies listed, Fonterra is not particularly well diversified, deliberately so. It has specialised in being a supplier of ingredients to food manufacturers rather than creating consumer products and brands, apart from its domestic brands like Anchor and Mainland. To the outside observer this has appeared to be both a successful and logical strategy less demanding of scarce resources than trying to match global FMCG companies like Nestle, Kraft and Danone.

 

Another weakness is the increasing importance of China as a market with its special emphasis on infant formula. Each of the three health scares, Sanlu melamine scandal, DCD residues in milk and the latest possible presence of botulism, is seen as a serious threat to the lives of Chinese children. Each time New   Zealand dairy produce and its clean, green image have been compromised.

 

Fonterra’s handling of its public relations has not been as surefooted as it should have been. The melamine problem was not Fonterra’s fault, but the last two issues have both suffered from inexplicable delays in fronting up and admitting there is a problem. With DCD the repetition of the phrase ‘there is no food safety risk’ tended to be swamped by the perception of a cover-up because, between Fonterra and MPI, disclosure was delayed for four months.

 

But this latest scare has been traced to a problem with a pipe more than a year ago and tests have been going on for several months until the problem was disclosed last Friday. The Chief Executive Theo Spierings has flown post haste to Beijing to manage the Chinese fallout, leaving the Gary Romano, MD of New Zealand Milk Products to handle the constantly moving PR situation.

 

This may be the most appropriate division of responsibility and, to be fair, Romano has always been available to talk to the media. But there has been contradictory information emerging at various times and MPI’s Acting Director General has also been making statements without having all the information he might have wanted.

 

In addition Fonterra’s Chairman John Wilson has been conspicuous by his total silence which has led to calls for his resignation from some dairy leaders.

 

The overall impression is of a company which is in complete control neither of its production processes nor its public relations. This is not good for New Zealand, quite apart from the damage it will have done to Fonterra and its customers, and raises questions about the appropriateness of one company being allowed to have such a disproportionate impact on the country’s global reputation.

 

Fonterra is by no means the only business to suffer damage to its business or its reputation. Danone subsidiary Nutricia and many other manufacturers of infant milk formula, indeed all New Zealand dairy related businesses, will be adversely affected.

 

The question has to be asked whether it’s good for New Zealand to be so reliant on the dairy industry and also whether Fonterra itself is in danger of becoming a one trick (or product) pony.

Biosecurity thoroughly underprepared for high-risk incursions

The Auditor General’s report into the current state of readiness to cope with potential high-risk threats to our biosecurity makes sobering reading. In the report Lyn Provost, the Auditor General, makes a number of recommendations for improvements, while complimenting MPI on recent progress. But the overwhelming impression is one of a disaster waiting to happen.