The gap between Fonterra’s $834 million profit and what it is paying its farmers has sickened Northland dairy farmer Lyn Webster.
While she accepted it was a good financial result for the co-operative, Webster felt it had come at the expense of non-shareholding dairy farmers like her.
Webster milks 170 cows on farmland southwest of Kaitaia. Like many sharemilkers and contract milkers around New Zealand who supply Fonterra, she does not own any Fonterra shares.
According to DairyNZ statistics for the 2014-15 season, there are 11,970 herds in New Zealand. These herds comprise of 8059 owner-operators and 3879 sharemilkers. Contract milkers and lease farmers are included among the owner-operators.
As a result, she does not qualify for the 40 cent dividend given to shareholding farmers in its 2015-16 financial result and instead relies on the farmgate milk price the co-operative pays to its farmers. For the 2015-16 season, that milkprice was $3.90 per kilograms of milk solids.
Last season’s low milk prices almost led to Webster exiting the industry, but after talking with the owner of the farm she leases, he agreed to give her a portion of the dividend to keep her financially afloat.
The structure of New Zealand’s dairy industry was well placed to handle market volatility and Webster understood why it was important to have a milk price that reflected the international dairy market. But this was a double edged sword for non-shareholding farmers trying to save up to buy shares when the milk price was $3.90/kg MS.
“I don’t know how I’m ever going to get into that and a lot of sharemilkers that are really the lifeblood of the industry will be exactly the same position. Their future’s at the discretion of a shareholder.
“That’s what a $3.90 milk price does to people. People like me who have put all of our money into cows and cannot afford to have [Fonterra] shares so we are not shareholders, it’s at someone else’s discretion as to whether we survive or not. It’s awful. We have lost control.”
The dividend being paid to shareholders provided a great carrot to non-shareholding suppliers to buy Fonterra shares, but the dire financial circumstances of farmers such as Webster meant it was an unobtainable goal.
“In the meantime, I’m sinking into a bigger and bigger hole and I’m working my arse off.
“I would dearly love to buy shares and be a shareholder but I’ve put my whole life into just milking those cows.”
The $3.90 milk price was not financially sustainable for non shareholding farmers. Most of the money Webster earned went towards keeping herself financially afloat.
“And if there’s anything left over to treat yourself you’re … lucky. We’re mostly happy to have our ships floating along nicely and our cows healthy because that’s what’s important, but you can’t even do that on $3.90. It’s disgusting.”
Webster was concerned there would be more farmers that exit the industry – either voluntarily or being forced to by the banks.
“It’s pretty bad considering it’s meant to be our crown jewel.”
The fundamental problem with the dairy industry was that while milk was a great product, it was a financial liability until value was added to it. When value was added, that was not returned back to farmers fairly.
“It’s the milk that is valuable, because if the people making the milk can’t afford to produce it any more, there will be no more milk to add the value to.
“For them to make an $834m profit, they have to snatch that milk off me at a price that makes me very angry.”
The slow recovery of the international milk price will be on the backs of farmers – both in New Zealand and overseas – who have gone broke.
“That’s sickening,” she said.
Source: Stuff
