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OPINION – Why I’m not proud of Fonterra

OPINION: Over the past eight or so weeks there have been lots of conversations, and not all of them sensible, in our house regarding the milk price and what we believe being part of a co-op means.

Those discussions also involve how we are tracking with production and our forecast budget so we stay on the right side of our bank manager and the ASB Bank.

Sometimes we venture into conversations after reading media articles of others’ opinions on how Fonterra conducts its business on the world stage.

Those discussions between my husband Geoff and I are dangerous ground because we have differing views on several topics, but the one on which we lock really sharp horns is being “Proud Fonterra Farmers”.

Some of those discussions have had to be terminated due to the need for world peace.

A lot of people have lots to say about how Fonterra is run, how farmers own it and whether we get a say on every decision.

A large percentage believe farmers dictate the shelf price of dairy products and even more believe farmers pay no tax.

Those are two things they could not be more wrong about.

I think quite simplistically about lots of things, but one of the things I have always thought to be extremely simple is business.

You provide or receive a service or goods, you get an account for said transaction, you pay the account and utilise the product or service to enable you to run your business and in turn make a living, or at least stay afloat.

When I took over the farm accounts for Geoff’s sinking farming business nearly 10 years ago I sat at the kitchen table at 3am one morning looking at a sea of paperwork, thinking to myself “I can NOT do this”.

A phone call to our accountant, David Bailey, the next day gave me the simple advice that I needed. “Louise I want you to apply your small business practices to the set of farm accounts in front of you. You can do this!”

That one sentence changed my entire agribusiness world, not only how I looked at it then, but also how I manage our agribusiness books now, which is really simply.

The one thing I needed to educate myself on back then was how farmers got paid so I could manage the incomings and outgoings a bit better.

You see, when we send milk for an entire month we don’t get paid for it until the 20th of the following month – that’s pretty standard practice in the business world.

However, when the payout is announced at $6.75 per milk solid, that’s not what we get paid for every milk solid that we send in a month. In actual fact, as in past seasons, we may not see it at all by the time the season has ended.

Fonterra, in our case, takes all of the product we supply them with as part of how we run our business. In return, the following month we get an advance on the milk price, which this month is $4.25, and the balance (if it comes to fruition) we will wait for and receive in residual payments after our season finishes on May 31, 2018, right through to October, 2018.

If for some reason the milk price does a landslide similar to 2014, not only will we not get paid the residual payments for what we have supplied, we could end up having to pay money back, which back then resulted in no cheques for five months.

I remember a couple of seasons ago waking up one morning to milk and realising that overnight our forecast budget had taken a hit of another $30,000, due to a slide in the Global Dairy Trade Auction.

That’s when our bank steps in and picks up the slack. In the last dairy downturn even for those that were mortgage-free and had been farming since Adam was a cowboy needed cash-flow assistance from their banks.

We borrow in the form of overdraft extensions against any equity we have to pay the farm accounts every month for the goods and services we rely on to run our farming businesses.

Unlike Fonterra, we don’t expect the businesses we deal with to wait for their money. There have certainly been months when I have made very humble phone calls to explain why we are late with payments and the people we deal with are always fabulous.

But they have families, staff and mortgages too, and most of these businesses are family-run and have accounts to pay on the 20th of every month.

Some farmers found it so difficult to manage their way through the last dairy downturn they ended their lives. People lost their farms, homes and jobs and some families split up due to the financial pressure and continuing onslaught from the commentators on the sideline who think all farmers are parasites.

I sit on the board for the Northland branch of the Rural Support Trust, which is just one of many organisations out there helping farmers who are still struggling financially, mentally and emotionally to mop up the mess from the last dairy landslide.

And that is why I am proud to be a lot of things – a wife, mother, grandmother, good friend and neighbour. I’m very proud to be a customer of ASB Rural Banking but I’m not a proud Fonterra farmer.

Keith Woodford’s final two paragraphs in his October 16 article summed up how I feel about everything to do with Fonterra. He wrote, “Of all the annual reports that I read, it is Fonterra’s that requires the most effort to decipher what is really happening.

In part, this is because Fonterra is indeed a complex global company.

“But it is also because the Fonterra PR machine is ‘hard-wired’ towards ‘good-news’ stories rather than transparency. It should not have to be that way.”

Everyone is entitled to an opinion, and this is just mine. It doesn’t pay the bills though.



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