Spierings warns of threats to trade
Concern at rise of nationalism, protectionism
FONTERRA Cooperative Group, the world’s largest dairy exporter, says a resurgence of nationalism and increased protectionism threaten global trade.
Chief executive Theo Spierings told institutional investors at a briefing that among global trends, a ‘‘resurgence of nationalism brings uncertainty’’, citing Brexit, Turkey, China, Russia and the United States, and also noted that ‘‘protectionism threatens global trade’’, said notes from the briefing posted to the New Zealand stock exchange.
Fonterra is the world’s largest milk processor, taking in about 22 million tonnes of milk a year, and accounts for 17% of global dairy exports, sending its products to more than 140 countries. Growth in global trade is uncertain this year following the election of US President Donald Trump, who favours protectionism and has withdrawn from the Trans Pacific Partnership trade deal, and Britain’s plan to withdraw from the European Union.
Mr Spierings predicted volatility in commodity prices would prevail. Global dairy prices have become increasingly volatile over recent years as government subsidies and schemes propping up prices have reduced, allowing prices for more products to be set by the market.
For farmers, that has meant huge swings in prices. Fonterra paid a record $8.40 per kilogram of milk solids in the 201314 season but just $3.90/kg ms for the 201516 season, below the level required by most dairy farmers to break even.
Still, Mr Spierings said the dairy cooperative remained on track to meet its 2025 target of processing 30 billion litres of milk from five to six milk pools, and generating $35 billion in revenue as it pursues a strategy to process more higher value products.
He lamented that global productivity growth of food production had fallen below 1% a year, compared with between 3% to 4% for much of the postwar era, saying growth of between 2% to 3% would have an ‘‘immense’’ impact on combating global poverty.
Climate change was working against the future of food. Food production contributed 30% of global greenhouse gas emissions and serious land degradation affected 20% of the world’s arable land, he said. — BusinessDesk