Taranaki
FARMING Lifestyles
November 2015 Edition
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Reaching out with rural support
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TARANAKI FARMING LIFESTYLES
First cheese off the line at Fonterra’s Eltham expansion
The Taranaki Farming Lifestyles is published with pride by NorthSouth Multi Media Ltd, a privately owned New Zealand company. Phone: 0800 466 793 Advertising: Betty Willets, Kelvin Green, Shane Hendriks
The expansion of Fonterra’s Eltham site has reached a key milestone, with the first individually wrapped slices of cheese now coming off its new production line and destined for supermarket shelves around the globe.
Editorial: Denise Gunn — 06 329 7701 Website: taranakifarming.co.nz
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Cheese is coming off the new production line at Fonterra’s Eltham site
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The new line is part of a $32 million project to bolster the site’s cheese capability, doubling the amount of the world-renowned sliced cheese that can be produced at the Taranaki-based site. Director New Zealand Manufacturing Mark Leslie, said Fonterra is constantly looking at trends in key markets and working with customers to help meet their growth with investment. “One of the most exciting things about our consumer and food service expansions is they’re almost entirely demand-led, meaning from the moment the first product comes off the line it’s already earmarked for customers in one of more than 100 markets around the world.” Mr Leslie said these expansions also diversify the co-operative’s asset mix, giving Fonterra more choices in what it does with farmers’ milk and allowing more agility in meeting changes in customer demand. Sliced cheese made
at Eltham comprises both individually wrapped slices and slice-on-slice cheese that is used in restaurants and fast food outlets, and is one of the co-operative’s most in-demand consumer and food service products. “It’s a product that really supports our V3 strategy, to deliver a greater volume of high value products, at velocity,” said Mr Leslie. “Once completed, we’ll be able to make around 2.3 billion slices of cheese each year out of Eltham, all of it sold into growth markets in Australasia, Asia and the Middle East.” Site manager Brendon Birss said the team is excited to reach such an important milestone in the project. “A lot of work has gone into completing the first phase of the expansion.” The second stage of the expansion is due for completion in February next year with the new sliced cheese line closing out the project.
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Draft report on dairy competition released
NOVEMBER 2015
The Commerce Commission’s release of a draft report on the state of competition in New Zealand’s dairy industry has been welcomed by Primary Industries minister Nathan Guy, and Commerce and Consumer Affairs minister, Paul Goldsmith. The two ministers commissioned the report in June this year, as required under the Dairy Industry Restructuring Act 2001. This Act authorised the development of Fonterra, and includes provisions to promote contestability in New Zealand’s farm gate and factory gate dairy prices to ensure their efficient operation. Mr Guy said the Commerce Commission has formed an independent view based on its expertise as New Zealand’s primary competition regulatory agency. “On balance, the draft report has found that competition is not sufficient to warrant deregulation at this point.” All those interested in making a submission on this draft report need to complete this by December 4. After a period for cross-submissions, the final report will be released by March 1, 2016. The Commerce Commission
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website outlines information about the report process and making submissions. Following receipt of the Commerce Commission’s final report, Mr Guy intends to consult on a package of policy proposals in mid-2016. “The dairy industry is a major part of our economy and this process will be helpful in assessing whether the Act is effectively promoting contestability, and in turn, the efficient operation of our domestic raw milk markets.” Mr Guy thanked the Commerce Commission for their work to date. “I encourage all those with an interest in this area to consider the Commission’s draft report carefully, and to make a submission if necessary.” The final report will help inform the Government’s policy decisions, particularly whether to allow the default expiry of the pro-competition provisions of the Act in the South Island.
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TARANAKI FARMING LIFESTYLES
PROVIDE PLEASING RESULTS by Denise Gunn
When making the conversion from dairy to drystock, Rob and Karen Schumacher began searching for a suitable beef breed to use over their dairy cows and heifers.
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he couple also planned to build up a purebred herd of breeding cows and were drawn towards Red Devon cattle. The breed’s temperament, good growth rates, and ability to be used over dairy cows to produce a hardy calf fitted the criteria. In 2004, Rob and Karen used semen over the tail end of their dairy herd. The following year they purchased three cows and one bull from Rotokawa Stud in Wanganui. Karen said initially their plans for dairy grazing meant they needed the cows to tidy up the paddocks. However, the couple were so pleased with the crossbred calves and their first couple of cows that they decided to grow their pedigree herd of breeding cows. “Over the years we have purchased cattle from a number of other studs to help us develop the type of cattle we like,” said Karen. The majority of their cattle have been bought from Joan Power’s Isca Stud in the Bay of Plenty. They still have
most of the cows purchased from her. “With the bulls, we have recently bought a lovely, young bull from Colin Nash’s Woodlands Stud.” Red Devon cattle are listed as a rare breed in New Zealand. However, they are making a worldwide comeback with record-breaking prices paid. As mediumsized beef cattle, the cows generally weigh close to 650kgs and bulls can weigh more than 1000kgs. With the average birthweight of calves at 36kg, calving is generally trouble-free. This has made them a popular choice for farmers calving both beef and dairy heifers. The Schumacher’s farm two properties with the home farm as a dairy farm. “In 2009 our work commitments with our conservation project meant we leased out most of the home farm, which has been brought back into the dairy industry,” said Karen. Rob and Karen downsized the beef herd and kept four hectares around their home. “This is flat, prime land which we utilise for making supplements, and we finish our cattle here.”
A 50 acre run-off in the eastern Taranaki hill country is used for grazing the cows. Their stud name, Maungawhiri, is also the name of the Schumacher’s home farm. “This relates to our proximity to the mountain, linking us to the ocean and the mountains in the middle of the North Island,” said Karen. Maungawhiri has a growing clientele for the Red Devon meat grown and produced on the property. Some of the meat is sold to individuals and through The Fridge Butchery and Delicatessen in New Plymouth. Four steers are also finished for Taratahi Agricultural Training Centre students to enter in the annual Hoof and Hook competition. Karen said although their focus is not on showing, they have developed a relationship with Taratahi’s Taranaki campus. “At present this is around providing suitable stock for their students to break in and train for the Hoof and Hook competition.” Last year two Maungawhiri heifers were entered into the Steak of Origin
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Taratahi students working with steers for the annual Hoof and Hook competition competition. “We were honoured to be a finalist,” said Karen. “If we have suitable cattle, this will be something we will enter again. It certainly confirmed we eat fantastic, quality meat at home.” The Schumacher’s have found the greatest challenge in breeding Red Devon cattle is keeping the fat off the cows.
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Bob Schumacher with cows on the run-off “They convert the feed very well, equally this means they do well on hilly marginal land.” said Karen. Involvement with Red Devon cattle has also opened up the door to travel to other studs and meet breeders. The Schumacher’s have visited studs in Australia, the United Kingdom and Brazil, and hosted Red Devon breeders from around the world on their farm.
“We have developed some great friends during this time,” said Karen. Although Maungawhiri could be considered a small stud with 15 breeding cows, along with young stock to finish, the Schumacher’s are fine-tuning the carrying capacity of their herd. Their long term plan is to have a constant supply of finished cattle ready to sell.
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TARANAKI FARMING LIFESTYLES
REACHING OUT WITH RURAL SUPPORT
by Denise Gunn
Marcia Paurini’s early introduction to rural life began on a Motueka tobacco farm where she was raised by one set of her grandparents.
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emories of her childhood on the farm include picking, sorting and tying tobacco leaves for the kiln, running wild among tobacco rows, and playing in the hops and apple orchards of Riwaka and Brooklyn. She also recalls trips up the Whanganui River with her father for shooting trips or to deer stalking events on a Parapara farm. “The smell of wool and dags in the shearing sheds, sliding down the shoots and falling asleep on a wool bale while the men talked over a keg or two are wonderful childhood experiences,” said Marcia. She believes these experiences also set her up for her current role as Taranaki Rural Support Trust’s coordinator. Marcia previously worked for the Inland Revenue Department (IRD)
Taranaki Rural Support Trust coordinator Marcia Paurini
and was initially invited to present information regarding IRD’s community roles to trustees of the Taranaki Rural Support Trust. “Following the presentation I was approached to become a trustee in November 2013, I left IRD and worked part time for an accountant, combining
it with the trustee role.” she said. Marcia recognised many possibilities for the trust to develop its role in rural communities and resigned as a trustee to take up the co-ordinator role in April this year. The coordinator position involves providing support, identifying an issue
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and offering options, information and contact details for help. Referrals come from a number of sources or through the trust’s rural helpline 0800Ruralhelp. “Once the issue is identified, we contact the rural family or individual and connect them to expert help or someone to listen.” Marcia said ninety-five percent of the time this is all that is required. “I enjoy having a real sense of purpose by supporting and meeting salt of the earth farmers who think Joe down the road is worse off and say they are okay. The sense of community with offers of help from quarters never expected is inspiring.” These offers of help can include baked items from a small bakery, support from a budget advisor, loads
of hay from Kaikohe or Wellington, offers to milk cows, and making meals for families. The Taranaki Rural Support Trust’s geographical area includes the boundaries of New Plymouth, Stratford and south Taranaki District Council, from Mokau across to Whangamomona and south to Waitotara. “I appreciate every day how lucky I am to be driving in beautiful countryside with the mountain at my back and the sunsets to view on my way home.” The Taranaki Rural Support Trust has seven volunteer trustees which include two farmers, an accountant, a PGG Wrightson farm advisor, a R D 1 manager, a retired farmer and a lawyer/ farmer. There are also 48 volunteer rural
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Marcia is training towards a Charity Cyclists ride
supporters spread across Taranaki communities. In response to witnessing farmers from other regions coming in to provide support to farmers during the 2004 Manawatu floods, 14 Rural Support Trusts were created nationwide by former Minister of Agriculture Jim Anderton. Funding is provided to trusts by the Ministry for Primary Industries, based on the classification of an adverse event — localised, medium or large scale. Marcia said this classification determines what help is available and what actions can be taken to help repair or reinstate affected farms. The Taranaki Trust has also been a recipient of Charity Cyclists who rode from Picton to Bluff, raising $160,000. “The trust will use this
money for activities that do not qualify as an adverse event — in other words peacetime work.” In February 2016, Marcia will join the Charity Cyclists to ride from Cape Reinga to Cape Egmont, then onto Cape Palliser in nine days. Donations will be accepted through the Joe’s Garage Charity Cycle Riders Give-A-Little page. “When magnesium inputs are required, Golden Bay Dolomite provides the simplest and most effective option.” call 0800 4 Dolomite
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Checklist for a build The total value of building and construction activity in New Zealand is forecast to top $200 billion over the next six years according to a forecasts from Building and Housing Minister Dr Nick Smith. With peaks in the Auckland market and in the Christchurch rebuild, there is a ripple effect right across New Zealand in towns and in rural areas, with a miniboom in lifestyle blocks, and sales of sections translating into new builds. With sections and bare land in demand from Northcape to the Bluff, builders are reporting an increase in new work, with a subsequent flow on to building supply merchants. This in turn, means prospective homeowners need to plan carefully, with the services they seek being more in demand. Whether it is a new build, or relocating an existing house onto a piece of rural land, it makes sense to give your local
builder a chance to price a new dwelling on your section before you make the decision to relocate. And make sure you check that any builder you do use is licensed. Hiring good professionals to help you can be crucial to the whole building experience. If you need a designer, builder, carpenter or tradesman, go to the Licensed Building Practitioner register. LBP’s have undergone a robust application process, including a written application, verbal testing by proficient assessors, and referees’ confirmation of their work. They keep up with the changing industry and undergo continuous skills
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any of the terms of the building contract, it is very important to consult a lawyer before you sign it. It is also important to remember that the salesperson you speak with before signing the contract is generally not the builder, so make sure any promises made by the salesperson are in the contract. As it is difficult to monitor and control the ongoing costs of a building contract, it is recommended that you think very carefully before entering a cost-plus contract and seek expert advice.
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TARANAKI FARMING LIFESTYLES
NOVEMBER 2015
BLUEPRINT TO HANDOVER
Make the right start
So you have the means to invest in a new property? There is an essential consideration that is the first step to ensuring that the experience is a good one, and that is obtaining a LIM report — a Land Information Memoranda. It’s a document that, by law, a council has to provide for any property within its district within 10 days of request. Anyone can request a LIM about any property and in fact you do not have to be the owner, or potential purchaser. The council that covers the area that the property is in will have a file containing information relating to that house. It is a summary of the content in this file that is contained in the LIM. A LIM can include a lot, or a very small amount of information, depending on the history of the property, where it is, and when and how often there has been council involvement with the property. Officially a LIM is a document produced by a territorial authority that contains a summary of any relevant current and historical information held by the council about a particular piece of land or property. If you are putting in an offer on a property, you should make a satisfactory LIM report a condition of the sale. The document is very useful in helping you decide whether the land is worth purchasing. You can determine whether the property has permits for all its building work, what zoning it has, whether it is free from any restrictions, what proposed local developments may affect the property, and whether the
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TARANAKI FARMING LIFESTYLES
ADVERTORIAL
Agrissentials can save you thousands of years by John K Morris CEO of Agrissentials
A Sanskrit text written around 1500 BC noted “Upon this handful of soil our survival depends. Husband it and it will grow our food, our fuel and our shelter and surround us with beauty. Abuse it and the soil will collapse and die, taking humanity with it.” It appears that producers around the world are engaged in an orgy of soil destruction, so intense, that according to the United Nations Millennium Ecosystem Assessment, initiated in 2001, the world on average has just 60 years left of
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growing crops. To keep up with global demand, the UN estimates 6 million hectares of new farmland will be needed every year. Instead, 12 million hectares a year are lost through soil degradation. We wreck it and then move on trashing rainforests and other precious habitat as we go. Soil is a magical substance, a living system that transforms the materials it encounters, making them available to plants. A handful of healthy soil contains more microorganisms than all the people living on earth. The techniques of agrochemical production that were supposed to feed the world now threaten us with starvation and malnutrition not to mention the serious health problems coming from the GM foods. In hindsight, the chemical age although initially looking good, has not done life on our planet any favours, in fact it has demineralised our soils resulting in nutrient deficient food which in turn is increasing disease within all form of life on our planet. Here at Agrissentials, we are fervently pushing multi-mineral, microbialrich fertilisers to increase quality and production. Our system has the ability to remineralise and regenerate topsoil depth improving the production power of your farm. Our system encourages worm life, essential for recycling all waste falling
upon the land, back into top soil. This is all part and parcel of Mother Nature’s system which has been operating on our planet for the past 460 million years. It is a system that is not only increasing production, but also, building topsoil at the same time. Now, that is magic! I do not blame any producer for any degradation of the soil. The obsession with the NPK soluble synthetic fertilisers is what is causing erosion and mineral degradation of the soils. This NPK Balance sheet theory was put forward by Justus von Liebig. If it was science, then it would be pseudo-science, because in reality, it is just a theory which von Liebig admitted was wrong. In the USDA Agricultural Yearbook 1957 the NPK balance sheet theory was declared false. United Nations FAO has chosen 2015 as the International Year of Soils. Soil is the largest pool of organic carbon essential for mitigating and adapting climate change. In an era of water scarcity, soils are fundamental for their appropriate storage of water and its distribution. Soil micro-organisms boost soil’s ability to absorb carbon and mitigate desertification. According to FAO Director-General Jose Graziano de Silva, it can take up to 1000 years to form one centimetre of topsoil. He urged investment in
sustainable soil management saying that it would be cheaper than restoration. Soil sustainability is definitely the best option; however, providing degraded soil still contains some carbon, restoration is possible through Agrissentials method and recipe of multi mineral, microbialrich fertilisers. The formula is for building humus (carbon) in the soil and at the same time providing nutrient to plants, animals and people. In trials on topsoils of some 50mm deep on a clay base, in Ruawai, Dargaville, over an eight year period, the topsoil increased to a depth of 250mm and deeper in some areas of that dairy farm. It’s simple, our innovative soil-building programme, is based on Mother Nature’s recycling system; the more carbon, the deeper the topsoil, the stronger the water retention. Check it out on 0800 THE KEY. There is a better way and Agrissentials can take you there. Go natural, start a new relationship with your land today and reap the benefits from working in harmony with nature. Freephone 0800 THE KEY that’s 0800 843 539 today for a FREE INFO PACK or you can contact your friendly representative Adrian Rowe on 021 873 304 to find out about the massive sale we have on all fertilisers this month that can make your land more successful.
TARANAKI FARMING LIFESTYLES
NOVEMBER 2015
DAIRY
11
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12
NOVEMBER 2015
TARANAKI FARMING LIFESTYLES
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100 IT’S NOT A TARGET
The older petrolheads talk in hushed tones to a new generation of the mighty Falcons and Commodores of yesteryear; of the coming of the Valiant Chargers, and the season of the mighty Godzilla Skyline. The thing is, this could be the last year of the great rivalry between the red and blue — at least as we know it. In the 12-hour endurance race which is a curtain raiser to the big day, Nissan’s GT-R blitzed past in the final laps to steal the crown — from a podium made up of an Aston and a Bentley. Audi came fourth. In the main event, too, the other marques are showing their fangs, with Volvo pipped for a podium place. With Commodore and Falcon now facing big changes, what will 2016 look like? Holden are keeping tight lipped, but in the meantime they are not letting the Commodore go quietly into the twilight. Their ferocious Redline model V8s have been a revelation, spurring arch-rivals FPV to make their own swansong just as manic. Now Holden have released a special edition of their usually tamer, calm and comfy V6, dubbing it the Storm. The Holden Commodore SV6 Storm ups the ante in the engine department, packing a 210 Kw, 3.6 litre direct-
injection V6, delivering, interestingly, more power than some of those old V8 ‘commies’ did back in the day. This mill is mated to a six speed transmission, an automatic with active select technology for crisp, rapid shifting. In line with some of that classic Commodore racing pedigree, the Storm features a limited slip diff as well, which may show a little of Holden’s intent. You could certainly tow a lot with the 350Nm of torque on tap, but it’s more likely that you’d like to enjoy seeing
what such power can do unleashed on the open road. What’s best about the Storm, though is its price. Following up on a very successful, limited-run Storm edition of the Commodore in 2014, the Holden management decided to make this model even more enticing. So as well as design tweaks such as custom red stitching on the upholstery, fog lights and satnav, the Storm only costs marginally more than its standard V6 counterpart. Many will consider this over the V6 Calais in the lineup.
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TARANAKI FARMING LIFESTYLES
NOVEMBER 2015
RURAL WHEELS
13
Six packed with potential by Andy Bryenton
In the world of off-road vehicles, there’s always room for more innovation. Adding more power can only push a machine so far in terms of practicality, before it gets claimed by the hardcore, dune-busting gearheads at the sports end of the spectrum. Adding utility, however — that’s another story. Yamaha managed to find a way to shoehorn in a little extra practicality when they released their three-seater Viking UTV a few years back. With the appeal of a helmet-free ‘cage’ for farm work, a big load tray and seating for three burly blokes (or two and the dog), the Viking stood out with a point of difference to its rivals. After all, many hands make light work. Three seats also meant that hunters and anglers could bring a whole party, not just have to choose one of their mates and leave the rest cold. Now, some other UTV manufacturers have built extended frame versions of their machines already, offering four seats to play with. Some have even added a bit more pep to the power plant to handle the extra weight. But when Yamaha brought out the Viking VI (as in a Roman six, to mix your ancient cultures), they did more than just create a stretched off-road limo. The engineering process involved was far more complicated than simply ‘cut, weld, bolt on seats, have a drink to celebrate’. While the Viking VI uses the same 686cc single overhead cam motor as its three seat counterpart, there is no lack of get up and go. The longer wheelbase would mean a hard time turning on a machine without power steering, but the Viking’s assisted system makes the wheel feel precise,
even at low speeds. Locking diffs and ample torque mean that, despite its size the Viking handles obstacles well, and don’t let the space between the wheels fool you — it won’t bottom out like a passenger car, even with six on board. The passenger has come first here, with a completely redesigned roll cage for safety, plenty of room on every seat to avoid the ‘not in the middle’ arguments we remember from dad’s Valiant, and a comfortable ride thanks to model-specific Maxxis tyres, built just to handle the extra weight. Most importantly for summer, the Viking VI has a total of eight cup holders — just the ticket when you’ve got six
people to the job site or the camp site. While many people need a UTV as a bigger brother to the old trusty quad, those who really want a go-anywhere alternative to the ute should definitely
take a look at this voluminous, trailready Yamaha. After all, more seating can easily become more storage — look at the double cab utes on the road as an example!
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14
NOVEMBER 2015
TARANAKI FARMING LIFESTYLES
LIVESTOCK
Be my Guest
Bill Guest Farmers of New Zealand
Membership Services: 09 439 5219 • 09 430 3758 www.farmersofnewzealand.com Email: newzealandfarmers@xtra.co.nz
Special resolution Farmers of New Zealand supports highly respected dairy leader and former Fonterra Director Greg Gent in sponsoring a special resolution to change the constitution of Fonterra reducing the size of the current board from thirteen to nine by 31 March 2016. This proposed Notice of Motion is up for discussion and resolution at the annual meeting of shareholders of Fonterra Cooperative Group Limited scheduled
to be held on 25 November 2015. The reported response by Fonterra Chairman John Wilson hitting back with, “We need to have a constructive and genuine
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consultation within the shareholder base, not have imposed a solution by two of our farmers on the back of an envelope”, demonstrates the typical father and mother stance that, we know best and we just can’t have an idea like this coming from out of the blue and not in our control. Chairman Wilson should not be so disrespectful or dismissive of Greg Gent. Greg is a director of a number of high profile New Zealand companies, an exchairman of the Northland and Kiwi Dairy Companies and played an integral part in the setting up of the Fonterra structure, which was not easy. The Gent proposition seeks shareholder support to reduce the size of the board and achieve a leaner and fitter Fonterra, making the Fonterra Cooperative more globally competitive and successful. As supplying shareholders our businesses and livelihoods depend on that. What Chairman Wilson proposes as an alternative is that they simply knock up a few options in a discussion document that they like or can live with and then undertake consultation with shareholders which will guarantee that board members and the shareholders council end their preferred solution. It is called selfpreservation. Remember the board has a number of ex-shareholder council members and the council itself has no doubt many aspiring directors currently in its ranks. Chairman John Wilson’s criticism of this resolution is in fact contrary to what the board previously promised. The chairman fails to disclose in his media release that the board’s stated position in the 2012 notice of meeting assured suppliers that the board and Fonterra’s Council had initiated a review to consider development of Fonterra’s governance and representation to meet the challenges of the coming decade. Over the last three years John Wilson and his board have not produced any review options to shareholders and therefore not met their obligations to shareholders. Shareholders must question why highly respected ex-directors are taking this action. They also must ask themselves why high profile independent directors are choosing to stand down from the board.
Such behaviour may be symptomatic of potential issues of concern around the board table. The proposal to reduce the number of directors does not target any directors on the current board. The process has been designed to make sure that shareholders retain the absolute power to elect the candidates they regard as the best candidates for the job. The NZ Institute of Directors in publishing The Four Pillars of Governance Best Practice for New Zealand Directors, states that a board composition is a direct contributor to board performance, achieving a balance of skills and experience on the board is a key goal. Diversity on a board is vital but should always be approached through the lens of demonstrated competence. Farmers of New Zealand believes that both the size of the board and the current mix of expertise around the board needs urgent consideration. We do not believe the current composition is even close to being appropriate to govern a large global processor and marketer of food products. It is also important to understand that after a certain period time a board can become comfortable with one another. While this can be a sign of seamless operations, it can also be an early sign of complacency. Recruiting new board members is an important way to introduce new thought and perspective to board debates while avoiding groupthink and related risks. Succession planning is inexorably linked to board composition. The NZ Institute of Directors makes the point that the interests of shareholders will be best served if its board acts with maximum efficiency and effectiveness. A Board that is too large may not give its members the opportunity of participating in discussions and decisions to the best of their ability. We believe thirteen directors is far too many. The notice of motion is timely and well considered. If this action had not occurred what we believe to be a critical debate would not be taking place. We thank Greg Gent’s and Colin Armer’s courage of conviction and professionalism bringing this issue to shareholders. It is timely to remind Fonterra’s Chairman John Wilson, the board, and the shareholder council not to underestimate the intelligence of Fonterra’s shareholder suppliers, to consider and form their own opinion regarding this very important notice of motion to downsize Fonterra’s board.
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TARANAKI FARMING LIFESTYLES
NOVEMBER 2015
15
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NOVEMBER 2015
TARANAKI FARMING LIFESTYLES
Dear Fonterra Shareholder, A special resolution to change the constitution of Fonterra reducing the size of the current board from 13 to nine by March 31, 2016 is the subject of a Notice of Motion at the annual meeting of shareholders of Fonterra Cooperative Group Limited on November 25, 2015. You will have heard by now the Council does not support this proposal. We are disappointed but not surprised by their stance. For clarity, their position does not stop the proposal going forward for a shareholder vote. If the proposal was successful they would then have the option to rescind their stance. We have been very careful and deliberate to take the politics out of what we are doing. So for that reason both of us have made it clear we will not seek election during the downsizing process ourselves and have not targeted individual directors. Our proposal is all about getting a fitter, faster and higher performing Fonterra, something we all desperately want. That improvement has to start at the very top. 1
Our proposed election method is designed to ensure fairness.
Farmers have always elected their cooperative’s board and they have shown over time to be very responsible with their vote. The only difference this time is that they will be electing all six farmer directors at one time. We do not see this as a risk to Fonterra. Our primary objective in this proposal has been to avoid targeting any individual director. The board is currently made up of nine elected directors and four appointed. We propose all elected directors be elected at the same time. This method is the only methodology we can see which avoids disadvantaging individual directors who may have recently been elected or those who are retiring by rotation. It also is the only method which achieves a quick, clean result. Following such an election there will be at least four appointed directors for continuity. Any alternative mechanism which did not elect all the new number of elected directors at the same time would be either unfair or it would take at least three years – or most likely both. Directors will be conflicted and reluctant to put their personal positions at risk even although they know it is in the best interests of the cooperative. 2
A board of 13 directors is unwieldy and inefficient
Both of us are experienced directors not just with Fonterra but outside that company. We know how board dynamics work. On the outside looking in we can see weaknesses in the current board structure and we firmly believe that is holding Fonterra back from fulfilling the promise it showed when it was formed. Look at Air New Zealand. The Government bailed it out for nearly a billion dollars at about the same time that Fonterra was formed. At that time it had a board of 13 directors and the company had lost its way. Today it has a board of 7 and it is one of our high performing international companies. That is not a coincidence. 3
There is no accountability
Over the years at election time we often get the "who do I vote for" call. It’s a reasonable call because with a large group no one knows who's performing. Imagine if each Fonterra director spoke for two minutes on each item...a very long meeting would ensue. So what happens in a group of this size is that some stay quiet, some dominate and some feel alienated. With a smaller board that becomes easier......they are all accountable. Those who are not performing or out of their depth will be quickly identifiable and typically they move on. That's the dynamic of a smaller group. 4
Top directors prefer smaller groups
It has always been difficult to attract good external directors to a cooperative company. That's driven more out of perception than reality. But it gets harder when they see a board of 13. That's something they are not used to and don't support. And remember - GOOD appointed directors have choice around which board/s they sit on. We are competing for their services. As an aside we have had unsolicited support from some of these people who have left the Board. The word on the street is that this is currently the case particularly as there is a strong view around why Ralph Norris is going and he rightly commands huge respect in the Australasian business community. 5
Factions will develop
Once again this is a totally normal and predictable behaviour in a larger group. This can deliver undue power to the Chair and also to a politically motivated executive. We are talking divide and rule. 6
We ARE doing this the Fonterra way
Our Constitution is the domain of the owners, not the board. We as shareholders have the absolute right to review it and change it. To slow down a review of the size of the board in order to have another six months of consultation is perplexing and inconsistent and is being used as an excuse only when it suits. How much consultation was there on PKE or spending large capital sums which led to recent credit downgrades? Would the Council have been so supportive of the farmer loans had they realised this consequence? These are just two recent examples of zero consultation on important issues and there are many more. 7
Leadership from the top must be seen to be done
Fonterra has three mantra's it pushes very hard - Value, Volume and Velocity. For those principles to succeed they need to be led from the top but the three-year old governance review is hardly an example of velocity! When the board looks at its own functions it takes over three years while a review of staff positions takes six months and results in over 700 redundancies. What kind of message is the board’s behaviour sending to staff? Any further delay in reducing the size of the board means we’ll get more consultation, more reviews, more delays and more costs while the most important change of all gets put off again. Our proposal is a tangible move we can make right now to improve the performance of the cooperative. No delays, no putting it off. Sorted by the end of March. If there are other governance and representation issues that need to be dealt with that can be done separately. We believe farmer shareholders now deserve the opportunity to vote on this.
Colin Armer 027 492 0521 colin@armergroup.co.nz
Greg Gent 021 478 021 gregwgent@gmail.com