Accepting Responsibility for Fonterra.Tuesday, Feb 18, 2003
The settling of the dust following Fonterra’s announcement of a probable further milk price decline for this season indicates a need for an improved approach by all involved in the success of Fonterra.
In general terms farmers had there wish granted when it was agreed that the large coop should be formed. It is regrettable that early indications shown by some farming leaders in response to lower prices are to disown the responsibilities inherent in their shareholding in the cooperative.
Fonterra is a farmer/producer cooperative, it exists because it was wanted and it needs to perform for the benefit of its members. Finger pointing and destructive pontificating is not what is needed from producers now.
What Fonterra needs right now are firm leadership and expert management.
Current dissatisfaction with Fonterra has many parallels with NZCDC in the 70’s and 80’s when New Zealand’s then largest dairy cooperative struggled to produce satisfactory results.. It took two hard nosed executives in succession to focus that company and finally achieve above average performance.
It seems the executives of Fonterra have allowed themselves to be sucked into an expectation of easy success with unrealistic projections for growth and market share covering the costs of expansion in to high risk ingredients and retail product marketing.
The reality is that the world market appears to be now paying on average $2.85 per kg of milk solids for the current mix of products. The added value activities of Fonterra add perhaps another 80 cents. This is not a surprise market aberration but parallels a well discussed market projection from five years ago.
A cooperative exists for the benefit of its members. Suppliers of Fonterra need to ensure that the directors and management focus on achieving the best result available from the market that exists and avoid the false promise of that that might be if…