The impact of Fonterra on the New Zealand economy has been massive and it is still not licked yet.
It was somewhat unfortunate that in the very same week Fonterra marked its first decade of mainly successful existence in New Zealand; next season’s forecast milk price was slashed by 45 cents a kilogram of milksoilds and its farmers in the upper of half of the North Island were forced dump millions of litres of milk that were unable to be processed due to the Maui gas pipe leak.
But this is probably a fair reflection of how Fonterra has performed during the past decade. On the whole, the dairy co-operative has performed pretty well, with numerous ups and down – many of which have been beyond its control. Despite these recent hiccups, there is no doubt about the major impact the co-operative has played in the New Zealand economy during the past 10 years.
Fonterra was set up in 2001 and represents about 96% of all dairy farmers in the country who collectively own 4.4 million cows. It is the world’s leading exporter of dairy products and New Zealand’s largest company with $14.1b in assets. The company collects more than 15 billion litres of milk a year from New Zealand farms and sells more than 2.3 million metric tonnes of product to export markets around the world. The dairy giant has paid around $65 billion to farmers and shareholders since its inception a decade ago.
According to a report released by the New Zealand Institute of Economic Research (NZIER) in December last year, the dairy sector accounts for 2.8% of the nation’s gross domestic product – or $5b. This contribution is greater than the GDP contribution of the combined fishing, forestry and mining sectors and around 10 times as large as the GDP of the wine sector. The dairy sector is also a major employer, providing jobs for around 35,000 workers in farms and processing plants.
The dairy volume expansion over the past decade has, according to the NZIER report, been worth an additional $650 of income per person in the Southland region and $590 per person in the Canterbury region. Northland ($110 per person) and the Waikato ($270) have also been major winners. Nationally the growth in dairy has resulted in New Zealand households being a cumulative $6.4b better off than if the
ector’s activity had stayed at 1999 levels.
And this growth shows no sign of stopping. Fonterra announced another record financial performance and record milk production for the current year, which will see it distribute milk payments and dividends this year totalling $10.6b – $2.4b more than in 2010 and $1.5b more than its previous best year in 2009.
Fonterra chairman Sir Henry van der Heyden said the benefits of a higher Fonterra payout extended well beyond farmgate, because farmers spent around 50 cents out of every dollar on locally produced goods and services.Van der Heyden believed it was fitting that the record result was achieved as Fonterra marked its 10th anniversary.
“Ten years ago, the New Zealand dairy industry came together to form a national champion in Fonterra. Our collective vision was to create a business with the scale to become a world leader in dairy ingredients and maximise dairying’s contribution to the New Zealand economy.
And that’s exactly what Fonterra has done, but now for that second decade…