Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
He says reducing emissions is “a reality that Fonterra and the dairy sector must face”.
O’Connor says Fonterra cannot afford to “bury its head in the sand”.
“This is a reality that we face, if we bury our head in the sand and ignore it, that makes the whole job tougher as we go down the track,” he told Rural News. “If we had started emissions reduction and focused on this 10 years ago, we would probably be in a better position today.”
O’Connor points out that major customers like Nestlé are setting emissions targets that Fonterra must either adopt or lose their business.
With the co-operative slashing a whopping $1/kgMS from its forecast milk price mid-point for this season, many farmers, facing higher input costs and rising interest rates, are now bracing for a loss.
This has prompted some farmers to ask the co-operative to slow down its $800 million decarbonisation programme announced last month.
The programme aims to reduce scope 1&2 emissions that come largely from manufacturing operations and the supply chain, by replacing coal with renewable energy.
The co-op says it’s talking with farmers about a target for Scope 3 – emissions behind the farmgate – which will be announced shortly.
But some farmers want Fonterra to slow down and wait until things improve.
Cambridge farmer and Fonterra shareholder Garry Reymer says after the milk price bombshell, Fonterra must relook at its greenhouse gas emissions goals.
“It might be better to start behaving like its farmer shareholders and put the cheque book away till things pick up,” Reymer told Rural News.
“$800m is a lot of money and you do have to question the timing of it.”
Former Federated Farmers president and Fonterra shareholder Andrew Hoggard says the co-op should be careful with the scope 3 target rollout.
He told Rural News that if the co-op required farmers to fill out multiple documents and took money out from their milk cheque for not meeting targets, then he wouldn’t be happy.
Hoggard wants something along the lines of the Clean Streams Accord initiative, where the co-op set long-term targets and gave farmers time to achieve them.
The ACT candidate says Fonterra shouldn’t allow itself to be held to ransom by a few major customers.
“These customers are willing to pay for it, they take the virtue and farmers end up doing the hard work. Fonterra must not just bend over but insist on getting some good returns.”
