Due diligence urged over Fonterra's Chinese operations

Federated Farmers is urging Fonterra to exercise caution in any expansion of its Chinese operations, announced yesterday.

"Federated Farmers is the prime cheerleader for the New Zealand dairy industry but we urge Fonterra to be cautious over the path it is taking in China," says Lachlan McKenzie, Federated Farmers Dairy chairperson.

"While its first operation in China was an experiment, Fonterra must be clear that farmers will only accept investments that maintain integrity of the Fonterra brand. Fonterra ought to be to ingredients, what Intel is to the IT industry.

"Federated Farmers firmly believes trust is an integral part of Fonterra’s strength as the world’s largest dairy exporter. That is not just from manufacturers who specify its ingredients as a matter of preference, but from our ultimate consumers.

"If there's concern about 'brand damage', Federated Farmers believes it won't come from applications for 16 ‘loose house’ dairy farms in the Mackenzie Basin. Especially as these applications all fall on existing stations in a modified working landscape.

“Rather, risk could come from a stocking rate of 94 cows per hectare in China, which compares unfavourably to the 3.5 cows per hectare proposed for the 16 farms in the Mackenzie Basin.

“Fonterra needs to apply the same values and standards it has demanded from potential suppliers in the Mackenzie Basin, to its Chinese operations,” Mr McKenzie concluded.