Farmers Weekly is carrying a yarn about concern about Fonterra.Manawatu/Rangitikei Fed Farmers VP Andrew Hoggard says Fonterra’s announcement it is considering raising $300 million won’t affect dairy farmers, but he is worried the co-operative is raising capital to pay the bills. Fonterra said in February it expects to offer senior retail bonds, with the ability to accept oversubscriptions. The co-operative said it intends to use any money raised for general business purposes, including working capital requirements.
Mr Hoggard said although concerned about the $300 million, there are other worries for dairy farmer shareholders. “We have heard that all Fonterra’s storage is full, meaning it is stockpiling product. That means it’s not selling.” He said these are worrying times for all farmers. “There will be serious belt tightening in the coming year as dairy farmers cope with the lower payout and have less money to use for any spending.
Your epidemiologist friends are certainly right. At one point China reported 158 babies were in acute kidney failure. Given that this is a serious condition needing a lot of specialised equipment, it is unlikely all of them survived.
A neonatologist friend reckoned that 20-30% would die within a month or two and about half of the survivors would die within the next 10 years from complications of chronic renal failure.
Yes. You did read that right. 30-40 babies are already dead. Another 50-60 will not see their teens.
Feel free to be sick. I know I will.
More than half of Chinese consumers have less trust in New Zealand dairy produce because of the poisonous-milk powder crisis engulfing Fonterra, says a survey by Sinogie Consulting.
This is the worrying bit.
Fonterra's 43 per cent-owned Chinese dairy company San Lu is one of 22 firms caught up in the scandal over the industrial chemical melamine being added to watered-down milk to boost apparent protein levels. The contamination has made tens of thousands of infants ill and killed at least four.
Sinogie, a Hong Kong company, commissioned a survey of 300 shoppers in Beijing, Shanghai and Guangzhou between September 22 and 25 and found 51.2 per cent had less trust in New Zealand dairy produce.
Wow that's a big survey.!
Sinogie chief executive Bruce McLaughlin was surprised the figure was not higher.
"What it suggests to me is that people are still seeing this as a San Lu problem."
Suggests???! A hint perhaps - and a nice time for a another brand to infuse the market.
There was not much damage to Fonterra at present but that could change in the long term.
"I would say that Fonterra has to keep its head very low in China at the moment. I think if they start shouting too loudly about the Chinese authorities being to blame, then the Chinese authorities will react and it won't be pretty."
More than half the respondents (56.2 per cent) said they had been buying more foreign-branded dairy produce since the scandal broke, while 79.8 per cent were worried that all brands of infant formula, domestic and foreign, could be contaminated.
New Zealand came second behind the European Union when people were asked to rank food from markets for trustworthiness.
"I think New Zealand itself enjoys such a strong brand that while Fonterra is obviously probably your biggest food company, I think people will still have a lot of faith in other New Zealand brands."
Mr McLaughlin said he had seen many companies run into difficulty in China.
"I think that people are blinded by this idea of mysterious China still. Because of that they don't think that they should go in with the same level of caution [as if] investing in Australia or America or somewhere like that."
A Fonterra spokesman said the company approached its investment in San Lu very cautiously.
"Fonterra has been doing business in China for over 20 years so the company was well aware of not just the business but also the wider political and cultural complexities of operating as a foreign company in China."
Fonterra undertook very deliberate and careful due diligence before making the decision to invest, he said.
Its strategy was to progressively upgrade operations and it had also begun a plan to introduce better-quality milk to the supply chain by investing in its first farm in China.
"However, in moving to steadily improve San Lu's quality-control systems, it was impractical to be in a position to protect 100 per cent against all risks to San Lu's supply chain such as a deliberate criminal contamination
Future investors must learn Fonterra’s lesson well. When you are dealing with an authoritarian society where face-saving is the norm, you must expect that mistakes and bad news will always be covered up. This is not to say that the Chinese are dishonest, far from it, they just have away of handling failure that confuses us. The type of transparency that you see in New Zealand, where even the Leader of the Opposition fronts up and apologises, is one that is unique to the West. Trade with China is certainly possible. Participation in joint ventures will require some work on both of our parts.
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