Facing up to the past
Fonterra’s Australian leader says the company’s treatment of farmers has changed since last year’s disastrous price crash.
The New Zealand company has been criticised by industry figures and even its own suppliers for following Murray Goulburn’s dramatic price cut and ensuing claw-back.
Speaking after the opening of the new Fonterra cheese plant at Stanhope, Australian managing director Rene Dedoncker said the company was interested in making sure it did the right thing by farmers.
‘‘To do that we need to make sure we honour the right pricing and that we can speak openly and transparently to them,’’ Mr Dedoncker said.
‘‘In the last 12 months that’s what we have done. We knew we had to behave differently.’’
Mr Dedoncker said Fonterra’s milk inflows had picked up but its pricing strategy had not changed.
‘‘The $5.50 is attracting farmers to Fonterra. I think our behaviour is also doing that as well.
‘‘We have completely changed our behaviour in the way we listen to our farming community and the decisions that we make.’’
Asked where the company was positioning itself with industry leader Murray Goulburn losing suppliers, Mr Dedoncker said its ambition was not to be number one, but it could end up taking the lead.
‘‘We have a clear strategy and we are implementing that strategy,’’ he said.
‘‘We may happen to be the largest but that’s not our focus.
‘‘Our focus is to get the right amount of milk, cheese, whey, nutritionals.
‘‘If the outcome is becoming number one, that’s what it will be.’’
Fonterra opened early this season with $5.30/kg of milk solids and then steppedup to $5.50 kg.
Mr Dedoncker said Fonterra was confident the price was reflective of market forces.
‘‘But we won’t move early, we will only move when we know we have made those decisions that are returning the earnings.
‘‘But we feel it will be a great year for farmers.’’
He said the potential was to move to $5.80/kg MS this season.
Mr Dedoncker was appointed to his position just after the milk price crash and admitted that meeting face-to-face with farmers affected by the price cut was ‘‘brutal’’. ‘‘We’ve learnt a lot from that.’’ He said he was now offering a different approach and the company was ‘‘looking them in the eyes’’.
‘‘If we don’t take a step towards farmers and protect their interests there is going to be a massive problem. We have to take shocks out.
‘‘Farmers want transparency and they want to know that the price they are getting reflects what is going on in the world.’’
He said the company had improved its communication with its suppliers, sending a four-page report out every four weeks.
Mr Dedoncker said the company had set a target of increasing milk supply to about 1.9 billion litres and had achieved that in recent weeks.
‘‘Last year we finished at 1.5 billion litres and now we are tracking closer to 2 billion,’’ he said.
‘‘A lot of that is coming here to Stanhope but much is also going to Darnum and to Cobden and Spreyton in Tasmania.
‘‘That is creating the net milk we need to run our factories efficiently and to deliver profit at the farm gate.’’
Asked about the recent Senate committee report on the dairy industry, Mr Dedoncker said although the code of conduct was voluntary, any dairy player that did not honour that code would be called out and scrutinised.
Although it was not enforceable he didn’t see any party who would step outside of it. He said the code should be ‘road tested’ first.
Making changes . . . Fonterra’s Australian chief Rene Dedoncker at the Stanhope cheese plant opening. ‘‘We knew 12 months ago we had to behave differently.’’