Battle for milk
OPINION: Fonterra may be on the verge of selling its consumer business in New Zealand, but the co-operative is not keen on giving any ground to its competitors in the country.
Grave is Fonterra’s newly appointed cooperative affairs manager in the region.
He says Fonterra previously took a centralist approach, but is now devolving more responsibility to a regional level to improve relations with farmer suppliers and others in direct contact with the co-op – local authorities, iwi, river authorities and DairyNZ.
Going regional is intended to make sure Fonterra is “integrated” into local rural communities.
“The very nature of New Zealand makes it hard for a one-size-fits-all approach, that’s why we have gone regional.
“There are a lot of different factors out there: my [counterpart] in Canterbury will be experiencing different things from what you see in Waikato. For example, he’s got a lot of larger scale conversions with irrigation, with their own set of issues, whereas here we have a lot of environmental issues such as the Waikato River – a big issue.”
Grave is concerned to connect with farmers during these tough times and explain to them what’s going on and why and make sure they understand the problems.
“We have run a series of small shed meetings for up to 30 farmers – talking to them informally about some of the issues instead of having a big meeting in a hall with a couple of hundred people where it’s very hard to answer questions.
“The farmers can front up in their gumboots to a shed and have a chat, which is a lot less intimidating. Farmers go away feeling a lot better informed about what’s going on.”
Grave says a lot of information is sent to Fonterra farmers, and he sees an informal chat in a dairy shed as better for them.
Transparency rules on GDT
Grave took up his present role after six years running Fonterra’s GDT platform. He’d also had sales roles in the US.
He says the GDT is not a complex system; it is a means of balancing supply and demand in a transparent way without which it would be difficult to assess what was happening in the market.
Grave says anyone who thinks that because Fonterra has lots of specialist staff it should be able to accurately set the farmgate milk price one year out needs to understand the market complexities.
“To get it right it means you have understood what the US/NZ dollar is going to do, what the Euro and US dollar is going to do, what Putin is going to do in Russia and what the supply in Europe is going to do.
“Then it [requires] knowing what the supply in the US is going to do and by definition you need to know what the grain price is and what the milk price is going to be in those places.
“Also you need to know what the supply in New Zealand is going to be and… a whole lot of other geopolitical factors… to come to that final decision in 15 months,” he says.
Grave says the best Fonterra can do is arrive at an estimate and it’s not possible to get it right given the huge number of unknown factors – not to mention the volatile nature of the world dairy market.
