Less than a week later I was online watching DIRA submissions to the Primary Production Select Committee and saw National MP Amy Adams ask Federated Farmer’s Dairy Chair Chris Lewis almost exactly the same question. Why, Adams wanted to know, should the Select Committee take any notice of a Federated Farmers submission. “I’m just trying to understand,” Adams said, “how you ensure that it isn’t effectively the Fonterra Shareholders’ Council by another name.”
Was Lewis voicing Fed’s opinion or that of the Fonterra Shareholders’ Council’s?
Therein lies the problem for the Committee of MPs, how do they cut through the obviously self-serving nature of every submission and arrive at the decision of what’s best?
Fonterra, their Shareholders’ Council and Federated Farmers all spoke strongly in support of amending the legislation and, among other things, halting the subsidisation of new competition. Competition can set up shop in New Zealand, they said, but make them compete on a level playing field and stop making Fonterra, a co-operative, subsidise it.
While I fully support their submission and truly believe it’s in the best interests of farmers, the industry and the country, there’s no escaping the fact it’s also what’s best for Fonterra. The importance of changing this legislation was clear when both Fonterra’s CEO Miles Hurrell and Chair John Monaghan turned up and pushed the Co-op’s case to the committee.
The other processors and their advocates put forward arguments as to why DIRA should be retained as is, and it was pretty hard to watch: Goodman Fielder believe they shouldn’t have to pay a nominal fee to Fonterra for piggy backing off Fonterra’s supply chain, even though they have had 18 years to set up their own. Miraka voiced a complaint that is shared by most independent processors; that Fonterra pays farmers too much and uses this as a tactic to squeeze the competition. As Fonterra now has 10 competitors and their market share has dramatically decreased since the legislation was first passed, this isn’t a compelling argument, and under questioning Miraka admitted that they actually pay their suppliers more than Fonterra does.
Open Country Dairy, who is in the middle of a High Court battle with the Commerce Commission over milk price calculations, made the bold move of opening their submission by insulting the Select Committee chair. Even veteran Fonterra critic Peter Fraser, an ex-economist, failed to make any convincing arguments for the retention of DIRA.
The problem the independent processors all faced is they were arguing for legislation that clearly hamstrings Fonterra and the only beneficiaries are themselves, and it’s difficult to come across as the underdog when that’s all you’ve got. Given the lacklustre arguments from those who submitted in favour of retaining DIRA unchanged, it’s little wonder that Synlait, who have recently won the South Island contract for fresh milk supply from Goodman Fielder, decided not to front. Writing a submission is one thing but defending it in the face of tough questioning is another.
Things got better when actual farmers spoke; Don and Jess Moore were passionate about improving their farm and aspired to supply Fonterra when they could afford shares. They were passionate advocates of the cooperative model and, like so many other farmers who submitted, firmly believed that Fonterra keeps the independents honest. Fonterra is required to pay the maximum sustainable milk price; private companies by their very nature want to keep the cost of their raw product as low as possible.
Leighton Pye, a large scale vegetable grower and dairy farmer in the South Island, told a cautionary tale of how vegetable growers are paid for carrots and potatoes; the processors calculate the grower’s costs and pitch their price just high enough to ensure a 5% margin. This, he warned, was the future for New Zealand farmers should the cooperative model be replaced with private companies.
The Select Committee hearings showed two clear sides to the DIRA debate -- on the side arguing for reform were Fonterra and farmers, even farmers who supplied other processors, and on the other side were the independent processors who want to maintain the status quo. What this discussion needed was a submitter with either interests that encompassed the whole industry or no vested interests at all. At the eleventh hour that submitter came forward in the form of the Dairy Worker’s Union (DWU).
The DWU view the debate from a unique position as they have relationships with all the processors and their interest is in the wellbeing of the workforce. The DWU want what’s best for their members in terms of pay, benefits and health and safety. During their submission it became clear that Fonterra sets the standard for worker conditions. While the number of jobs in the industry may remain static as the milk flows from one processor to another, the DWU reminded the Select Committee that not all jobs are created equal. “We have a huge fear from our members inside Fonterra at the moment that they are seeing direct loss of roles while just down the road more and more operations are establishing who aren’t meeting industry standards.”
The DWU didn’t hold back when it came to naming names: “Fonterra is required to set and pay the milk price, and you have competitors such as Open Country that do not meet the industry standards, do not pay the appropriate wages to workers, and I could go into the health and safety record of the Talley’s family, but I won’t.”
It wasn’t just worker’s rights, the DWU obviously shared my concerns with Fonterra being required to supply milk at cost to new competitors and said: “It is hard to imagine, apart from trying to hamstring your opponent, why you would predicate a business case on three years’ worth of supply. That doesn’t make any sense to me.”
To have one of the country’s biggest unions and one of the Labour Party’s biggest donors speak so strongly in support of Fonterra’s submission, and to publicly hold Fonterra up as the company that sets the standard for working conditions, is huge. I would like to think it’s a game changer, but sadly that’s not how this game is played.
Compelling evidence, facts and logical arguments are only enough to win you some concessions, but politics will always have the final say.
I hope Fonterra’s Board aren’t expecting to get everything they wanted; they’ll get some changes, their team has fought hard and deserve them, but there’s a long way to go and there will be another review before DIRA is consigned to its rightful place in the history books.
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