19 May 2016

Fonterra 'robbing from Australia to help NZ'

4:44 pm on 19 May 2016

Fonterra is facing an angry backlash from devastated Australian farmers, who say they are victims of "immoral" cuts to milk payouts.

Organic Jersey cow on a Rongotea farm.

Photo: RNZ / Alexander Robertson

The farmers are angry over big cuts by Fonterra's Australian counterpart that they say have piled on so much pressure that farmers are reporting at least five suicides in the past three weeks.

The backlash is fierce and intensifying in the $A2.4 billion dairy heartland of Victoria.

Fonterra is facing a possible lawsuit in Melbourne, an investigation by the Australian Competition and Consumer Commission into the timing and notice of the milk price cuts and grassroots anger at townhall meetings.

Ben Govett - who does not supply Fonterra but has friends who do - organised one last night in the Tongala public hall.

"We have no animosity towards New Zealand farmers, they are hurting at the moment, the milk price is hurting them, but it seems like Fonterra is robbing from Australia to help New Zealand," Mr Govett said.

After months of signalling prices would hold, large Australian co-operative Murray Goulburn unexpectedly cut its price in late April from $5.60 per kilo of milk solids to between $4.75 and $5. It sets the benchmark as the largest operator, so its main rival Fonterra was able to follow suit - though farmers said there was no reason to do so.

The cuts apply back to last July and were now being clawed back, this month and next, so that some farmers would get 13c or 14c a litre at the farmgate, instead of about 40c.

Victoria Liberal MP Sarah Henderson called it "corporate thuggery".

Ballarat schoolgirl Chloe Scott, whose farmer father Brendan supplied Fonterra, launched a petition aimed at Agriculture and Australian deputy prime minister Barnaby Joyce. It has garnered 108,000 signatures in a week.

"I was pretty annoyed," the 16-year-old told RNZ News.

"You know, it's something that's going to affect not only our family, but a lot of dairy farmers that are with Murray Goulburn or Fonterra. Dad's had to cull some cattle so we can minimise the damage that's going on but, we're just going to have to take it day by day."

Ms Scott spoke by phone to Mr Joyce yesterday, but said he did not map out the long-term fix in the milk price system her petition called for.

In New Zealand, farmers are facing a final price this season of just $3.90 a kilo of milk solids.

Fonterra Australia managing director Judith Swales wrote in a business paper yesterday that farmers there just have to "get real about milk prices".

Fonterra NZ chief executive Theo Spierings has been widely quoted as saying Fonterra was going to "drive every cent of money which we can out of Australia back to New Zealand shareholders in this extremely low milk price environment".

Australia Deputy Prime Minister Barnaby Joyce said Mr Spierings' blunt message to Australian milk suppliers was "foolish".

Mr Joyce said the reported comment would be a very foolish thing for any person to say, considering the hurt so many Australian dairy farmers were feeling.

Mr Govett said Mr Spierings was lucky he was not at last night's meeting in Tongala.

"I'm not sure I'd be able to get a word into him, he would be mobbed, I'd say.

"But I think they really need to have a look and come back and see the destruction they've already caused. We have already had suicides in the area, over five as of now. Herds have already disappeared, herds have already been culled."

Mr Govett said he knew farmers who were facing losses of $120,000 - $150,000 this year, and some were giving up.

Lobby group Farmer Power feared hundreds would be driven out of the industry, and said that was wrong, when the Victoria state government had just contributed to a big cheese factory revamp by Fonterra.

There was legal action on two fronts - Murray Goulburn shareholders are suing it in the Supreme Court, claiming they were misled.

And Melbourne lawyer David Burstyner was judging the waters for a class action against the two co-operatives.

"We think it's immoral amongst many other things," Mr Burstyner said. "We think that it should never be done.

"We also see the difference in the way Fonterra has done it, claiming back in the space of two months. Not over three years, like the other company is doing."

Fonterra Oceania managing director Judith Swales acknowledged that times were tough for farmers, but said the Australian milk price was not sustainable.

The problem was Fonterra was "contractually obliged" to pay farmers a milk price not less than the leading Victorian milk processor, she said.

"That price was set at an unsustainable level that was not a true reflection of global dairy market reality.

"As a result, we've been losing money in Australia. We've reduced our costs and divested assets, but we can't stand by and watch our business continue to lose money. Cutting our farmgate milk price was necessary."

The only way to have a sustainable and strong Australian dairy industry was for farmers to receive "timely and transparent price guidance", she said.

"We owe it to our NZ farmer shareholders and our Australian farmer suppliers to ensure our Australian business is sustainable for the long term."

But Victorian dairy farmer Karrinjeet Singh-Mahil said Fonterra never gave any indication its milk price was not sustainable, and farmers were still waiting on information about a promised loan.

"There's some pretty poor decision making in such a large company, both at the top levels of management, but also at board level, because one of the consequences of this entire situation is that Fonterra's reputation has been irreparably damaged."

Ms Singh-Mahil said the backlash could do long-term damage to the company's key export markets in Asia.

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