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FONTERRA’S RECENT botulism scare has not dented customer confidence, says chairman John Wilson.
Demand for Fonterra products remains strong on Global Dairy Trade (GDT) auction, he says. “The feedback we are getting from customers is they want to see Fonterra doing exactly what it has done,” he told Rural News.
Fonterra achieved its highest-ever monthly revenue from the GDT auction in August, selling 109,664 metric tonnes, worth $685 million. Its August GDT sales volume was up 27% on the same time last year, and revenue up 107%.
Higher forward contract prices for Fonterra commodities secured on GDT prompted the co-op last week to raise its 2013-14 season forecast payout by 30c to $8.12/kgMS. It comprises a milk payout of $7.80/kgMS and a forecast dividend payout of 32c/share.
Wilson points out that the botulism scare – found to have been a false alarm in new tests ordered by MPI – was handled well by the co-op, but there may be room for improvement.
“With hindsight, we could have had more fluent management and our messaging could have been bit more clear,” Wilson says. “But everyone must understand it was a complex recall involving multi companies which had used the whey protein in multi products.”
Fonterra’s board is reviewing the way the botulism scare was handled by the co-op. Wilson says the reviews will ensure “if the same situation arises, we can do better”.
But Wilson points out GDT customers remain confident in the co-op’s ability to supply safe, quality commodities. Forward sales contracts for October to January remain strong. “Current market views support commodity prices remaining at historically high levels longer than previously forecasted.”
Federated Farmers Dairy chairman Willy Leferink says “a roller-coaster month to forget” for Fonterra has ended on a high with the payout announcement.
“It has been a hellishly tough month for Fonterra but this revision underlines that the fundamentals of the New Zealand dairy industry remain strong. New Zealanders should rejoice that the immediate financial damage from the recall, and market access issues elsewhere, will not dent the economy. With an eye to the future… we cannot afford a repeat of this month’s problems, but right now, this confidence in the dairy industry is a huge relief.”
While Fonterra has lifted the farmgate milk payout by 30c, it has not increased the advance rate of $5.50/kgMS to farmers.
With only four weeks into the co-op’s financial year, there were a number of uncertainties, Wilson says.
Fonterra will this month provide an update on its business performance and its 2012-13 annual results.
OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.
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