“I feel a change coming on”

Fonterra has more than just its financial restructure head-ache to mull on this weekend. Its dogged support for rainforest-destroying palm kernel feed (PKE) must now be giving them a cracking migraine.

PM says “Of course, [PKE] has some impact”

First, the Prime Minister changed his tune. He initially lept to parrot Fonterra and FedFarmers by saying: “It’s a waste product, in my opinion it’s not leading to deforestation and on that basis I have no intention of intervening.” But in answer to questions from Russel he said, “Of course, it has some impact; the Government does not deny that”.

This shift was because Russel presented the evidence (as he had done weeks earlier) that PKE’s real and proportional values, and the level of NZ demand, “significantly add to the profitability of [the palm] industry and helps fuel its expansion into virgin rainforest across South-east Asia”:

  • New Zealand paid $317 million for palm kernel in 2008
  • PKE contributes up to 15 percent of the income stream of the palm oil industry [We’ve asked the PM for the source of his 1.5%, and checking our up-to-15%]
  • Daniel Cheow, the managing director of a Malaysian palm kernel exporter called Palmbase, said that palm kernel prices “have shot up as demand is coming in much faster than expected, which in part is a result of the dramatic increase in demand coming from New Zealand”
  • Diesel is a “by-product” of the petrol industry, but we don’t downplay its value and contribution to greenhouse gas emissions
  • The World Bank withdrew lending to Fonterra’s kernel partner Wilma last week because of its role in rainforest destruction
  • Fonterra subsidiary RD1’s own comments that the price of palm kernel is ‘driven by demand’.

Incidentally, the PM also took an unusual step of inciting protest: “I look forward to the Greens and Greenpeace picketing supermarkets [about palm oil], if they really want to stop deforestation.” Nice.

International press spot-light

Second, the Greenpeace action in Tauranga, and the pressure on Fonterra’s use of PKE since the Sunday Star Times expose a month ago, has rippled through the international media. Reuters, BBC, AFP, AP, ABC/Radio Australia, Reuters India, Chile TV, ChinaThe Canadian Press, even the Scotsman and the Belfast Telegraph. And the USA Today.

If the facts are unpalatable for Fonterra and the Government, the international media spotlight will have got their attention.

“I feel a change coming on” said Dylan

It may be that the “Greenpeace protest won’t shift Fonterra or PM” (as Stuff put it), but the protest, plus international media spotlight, plus the evidence, already has.

The solution is simple: use our own supplementary grain and maize feeds, supporting our farmers, reducing biosecurity risks, reducing current account deficit by $313m, saving the rainforests and showing the world we can live up to ‘clean and green’.

24 Comments Posted

  1. How is admitting two mistakes fighting you?

    “If its not sold, but still produced, it adds nothing to profits and could even entail a disposal cost. If instead it is sold, why wouldn’t that be all, or mostly all profit?”

    There is nothing to apologise for in that statement though. The industry claims PKE is or was a waste product (to use the PMs terms). I assume that means it was once treated that way, meaning no use was known for it, so it was not sold and did not add to the income or profits of anyone.

    The day that they discovered a buyer, it went from by-product to co-product. I was just trying to say that as the production costs wouldn’t have changed on that day, that whatever amount they sold it for would be nearly all profit, minus shipping or whatever. That’s only an issue if we’re comparing the value to the industry to the profit for the industry, which I am no longer trying to do in this thread since I got the quote wrong. Understand?

    I’ll stop if you will.

  2. “Also in my first post, I did not mean to claim PKE as a by-product, but meant to say that the industry made this claim.”

    but here you were clearly using it to support your claim.

    “If its not sold, but still produced, it adds nothing to profits and could even entail a disposal cost. If instead it is sold, why wouldn’t that be all, or mostly all profit?”

    If you disagree with their claims, you can’t selectively use them to try and make the exacty opposite point!

    Why don’t you join me in trying to get some accurate and informed information into the debate, instead of fighting me every step of the way.

  3. Fair enough, I didn’t check the quote. I know I heard “profitability” some where, but obviously not there.

    Also in my first post, I did not mean to claim PKE as a by-product, but meant to say that the industry made this claim.

  4. I’m not querying the fact that PKE is increasingly a valuable product of the palm oil industry, and that the expansion of the palm oil industry as a result of its increasing economic returns is driving ecological destruction. But you can’t just say that in parliament with faulty figures to support your hypothesis. I fear the horse has already bolted on making a strong point about this, and the green’s imprudent innacuracy has stuffed things up. As someone who’s very concerned about this industry’s impacts, I feel let down by the greens who seemed more interested in attacking a favourite target (fonterra) than making the right points with the hard data to prove it.

  5. Valis, I have two points:

    “Dr Russel Norman: Why will he not admit the obvious, which is that because palm kernel extract contributes up to 15 percent of the income stream of the palm oil industry, it significantly adds to the profitability of that industry and helps fuel its expansion into virgin rainforest across South-east Asia?”

    That is Russel claiming PKE contributes 15% of the industry value. My analysis is incomplete, as acknowleged in my first post: I don’t have a wealth of official publications and economic data to draw on / get my researchers to draw on, and Russel does. If he hadn’t managed to get an accurate figure, he should have saved the question instead of discrediting himself with a clearly innacurate one.

    You can’t similtaneously say (1) it is a waste product and thus represents pure profit when sold and (2) its growing value as a co-product is contributing to the profitablity and thus the expansion of the industry. Once we have got to (2), the present situation, we can’t go back to (1) as the economic value of PKE in situation (2) becomes factored into the whole process of the industry.
    I don’t think Russel or frog are saying that, but you are in your defence of them! Why are you being such an acolyte? I’m posting here not in opposition but to support the accuracy of campaigns against some of the terrible practices of this industry. We’re not going to get anywhere with the highest levels of advocacy being based on extremely faulty figures.

  6. PKE is a co-product or by-product depending on how you look at it (and define the terms). The point is that it is not just a waste-product where the value is so low as to not influence demand and supply. We’re not being paid to take it away; we’re paying good money for it (money which could have gone to Kiwi feed growers).

    Take whey, for example, which is a co-product or by-product of the dairy industry. Most of dairy’s value is in mild solids, but whey is a significant export too. If the demand for whey increased, so would Fonterra’s profits and in turn the milk-payout would increase. This would add to the economic incentive to convert more land to dairy in NZ.

    As I noted in the post quite openly, we’re checking the sources for the PM’s 1.5% and our up-to-15% figures. We’ll revise it if it was wrong, but the argument holds even if it is less than 15% of the market.

  7. And my point is that the figures may be wrong, but by less than you say. I’m not an expert, but we keep being told PKE would just be disposed of if it wasn’t sold. Russel challenged that by saying it was contributing up to 15% of some companies’ profits. So he’s not trying to have it both ways. If its not sold, but still produced, it adds nothing to profits and could even entail a disposal cost. If instead it is sold, why wouldn’t that be all, or mostly all profit?

    Plus, as I said, Russel never claimed it was 15% of the industry value, so you’re comparing apples and oranges. I’m not defending the figure of up to 15%, I have no idea. But you’re analysis is incomplete at best.

  8. (d) should be “Russel’s figure for NZ PKE imports: $NZ 317 million”

    I just wrote it down incorrectly: theres no mess up in the calculation.

  9. Valis, my point is not that I’m exactly right, my point is that the figures the greens have been using are wrong. And as for your distinction between profits and turnover, that is completely fallacious: can’t you see that? If I have to explain why that is, I think there is no hope of a reasonable debate over this, but I think it will suffice to say that the whole argument has been that PKE is a CO-PRODUCT! You can’t have it both ways! The fact is that the greens haven’t prepared for this debate with the hard figures in hand, which seriously undermines the important position which needs to be taken about the palm industry.

  10. You may be right, but note that Russel quoted up to 15% as the contribution to profits, not turnover, so the figures could easily be different, particularly given PKE is a by-product and so its sale would be almost all profit.

  11. You may be interested to know what the original CEO’s wanted to name Fonterra before it was Fonterra and after the farmers stupidly turned the Dairy Co-Operative into a corporation.


    Does that say aomething about the megalomaniac mentality of it’s directors?

  12. Here are some back of the envelope calculations based on presumably accurate sources readily available on the internet:

    (a) Current palm oil price: $NZ983 / tonne
    (b) 2008 palm oil production: 48 million tonnes
    (c) Value of palm oil to palm industry as per (a) and (b): $NZ47.2 Billion

    (d) Russel’s figures for NZ palm oil imports: $NZ317 Million
    (e) Russel’s figure of NZ’s use of PKE as a percentage of total production: One quarter
    (f) Total value of world PKE according to Russel: $NZ1.268 Billion

    Proportion of industry value of PKE as per (c) and (f): 2.6%

    Proportion of industry value claimed by Russell: 15%

    As you can see, the green party research unit is not doing its job. Theres something seriously out about those figures. It’s not good enough to get up in parliament and make throw vague, inaccurate figures around. This issue is too important to be discredited on the basis of extremely sloppy research

  13. Subject: Hiding the truth
    Date: Sat, September 19, 2009 6:00 pm
    To: Frog@Frogblog.Green.nz
    Priority: Desperate

    Dear Frog

    Thank you for contacting Fonterra-(Your Friend in Prosperity) with your needless concerns about the perfectly safe and ethical importation of Palm Kernel Feed into New Zealand.
    I am attaching our 67 page document, 'Fonterra Loves your Family and you Love Fonterra' for your perusal. Once you've read though our marvelous story of riches and love, all of your irrational fears will be allayed and you will want to purchase more of our life-extending milk.

    Yours benevolently

    Cosyjoy Bundlesweet

    Fonterra (It's a place you want to be)

  14. “spinning.sh*t_into_white-gold@fonterra.com”

    sounds like a good idea, actually. It’s the waste sh*t that I’m worried about.

  15. We need to keep the momentum going and pile pressure on Fonterra until they listen. Consumer backlash is a good way to do this because it hits them in the only place that hurts – profits.

    I’ve stopped buying Fonterra consumer brands until they stop the importation of PKE and informed their consumer support people with a quick email explaining why I’m withdrawing my support of their brands. I got a prompt acknowledgement so someone at Fonterra does read the feedback.

    If enough people do this, they might listen. At least it’s a bit more pressure. And it’s not at all inconvenient to avoid Anchor, Mainland, Tip Top, Cadbury, etc.

  16. Hidden in tiny letters at the bottom of their web site is a ‘contact us’ link, which goes to a contact us form, that doesn’t work.

    I’ll pick up the phone on Monday, old school styles

  17. Tried and true method. The public’s attention is being drawn by other shinier matters, eh Mr Laws!
    Why don’t we ask them for comment. Knock on their door. Loudly.

Comments are closed.