Fonterra sticks with high pollution goal of increasing milk supply

This week’s reported comments by Fonterra chair John Wilson that dairy “volumes were only going to keep increasing”  are troubling. Mr Wilson was supporting a potential renegotiation of the New Zealand-China Free Trade Agreement (FTA). Under the FTA dairy products such as whole milk powder attract higher tariffs when volume thresholds are reached, often early in the year.

When China’s request for an extradition treaty with New Zealand is discussed alongside a potential renegotiation of the FTA, there’s a perception that human rights risk being traded off against a better deal for dairy.

What’s troubling about John Wilson’s comments is that once again the Fonterra supertanker shows no sign of changing course away from its high pollution goal of growing milk volumes year on year.  There’s no recognition of the need to focus on adding value and reduce the industry’s enormous environmental hoofprint.

Fonterra’s goal of growing milk volumes  understates the huge climate and water pollution burden dairying imposes on Aotearoa New Zealand and the risk of this undemrining the 100% Pure brand which the company relies on to market its products.

Last December the national dairy herd was at 6.4 million, producing the equivalent effluent to 90 million people with only 10 % of it treated, while on-farm dairy emissions comprise 19% of New Zealand’s greenhouse gas emissions .  Fonterra’s own research shows that producing a litre of liquid milk emits 940 g of CO2 equivalents.

National Government’s goal of doubling primary sector exports by 2025, its weak regulatory approach to land and water use, subsidies for irrigation and its failure to put a price on carbon have helped create perfect storm for dairying. They have encouraged a focus on maximising production and an intensive, high-input, high-cost dairy farming model. It involves high stocking levels, costly external inputs such as irrigation, and imported, environmentally-damaging feed like palm kernel expeller (PKE) to grow both grass and milk, and high levels of debt, including to service the capital costs of conversion and irrigators.

We need to shift from this high-input model to lower input, mixed land use, and more environmentally sound ways of farming, like organic milk production, that are more profitable.

And we need to diversify New Zealand’s economic base away from dairying and add more value to the food and fibre products we produce. We have a long way to go when nearly half the value of dairy exports come from milk powders and half the value of our wood exports is from raw logs, poles and chips.

16 thoughts on “Fonterra sticks with high pollution goal of increasing milk supply

  1. The money system must change if progress address runaway consumerism is to be curbed short term. Private greed an be regulated and must be.

    http://positivemoney.org/2016/04/money-creation-and-sustainable-development/

    Long term it seems that there can be no promise of a sustainable economy that looks anything like the present day waste generator. NNRs will soon run low at present day exploitation / pillage levels and conserving them will mean minimal usage and restoration of as much environment as that will allow. Everything we do will be constrained by shortage. Our thinking must and will change as we battle with the consequences of our past and present day thinking.

    Our consumption for lifestyle maintenance will be criminally frivolous – as it is today but with a more imperative understanding of what that means.

  2. Yes Trevor, I note that latest Green release on coal is under news, not blog. Perhaps Gareth doesn’t want me bombarding it with insightful facts about thorium.

    Spring blossom here today, but ended well. Thanks, to the Dutch police, honourable people. Trustin you’re all feeling safe, where ever you are. Hoping there was no connection between my day’s “wonder world event” and these comments below. I’m unsure, but feeling safe and taking things easy (except for me repeating my comment here, like a fool 😉

    Hey that last link from John was 100% on target. The problem for Fonterra is they have sunk an astronomical amount of money in the wrong place. Crime, insanity, stupidity or all three… “Huston, we have a problem!”

    Saw two helicoptors here today; one military, flying to NATO bunker under the local hill, the other in the Netherlands, more private lookin. Actually quiet rare to see helicoptors here, normally just lost of jet liners, flying to Wesel, an ex-english air-force site.

    Many questions, but some of the answers are coming:

    http://www.resilience.org/stories/2016-04-27/agroecology-now

    (Thanks also to the German police last week. We haven’t always seen eye to eye, but holding me for just half a day seemed fair to all parties.)
    _____________________________________________
    Today’s wonder-world-event started by a lake in the middle Netherlands, and a quiet “concrete storage” site that looked quite indescribably. Peaceful and quiet, with gentle sound of kids callin as they paddled on the water, from over the rise of the road. The bird life had to be seen; swans on water and hawk-like predator birds watchin from above. Oh and these amazing birds that always hid onthe water, behind the trees. I think they were Eurasean Coots. Amazing white and yellow flowers under willows and beech, plus the cherry blossom. Beautiful spring cherry blossom.
    ____________________________________________

    Fonterra’s debt is over 7.5billion.
    Fonterra’s board managed to almost doubled debt in just a few years, as milk prices where at record highs!

    4.666 billion debt (yes, point 666) in “medium term notes”.
    They confuse me with their reporting style, but I think they are paying 6.83% on this.
    Half a billion in bonds, unsecured investment pay 4.4% via NZX

    6.83% on today’s market can only be a ponzi scheme. But that must surely be unsecured lending 😉 or black n white crime.

    RadioNZ say total farm debt is 38 billion. If Fonterra where to pay farmers what they need, then Fonterra could surely be registered bankrupt.

    Fonterra would be a good buy for Landcorp NZ. Most of the 7.5billion debt seems like a straight right-off to me.

    http://www.dialogcrm.com/blog/2016/02/fonterra-needs-to-be-more-transparent-on-the-numbers/
    http://www2.fonterra.com/files/2016-03/fonterra-bond-offer-final-terms-sheet.pdf
    http://www.radionz.co.nz/news/national/298434/fonterra-what-shape-is-it-in

    If anyone would like to send regards to Bank Fonterra (technically via ANZ)
    here’s the address of their den:

    Fonterra Co-operative Group Limited
    9 Princes Street, Auckland

    A lovely looking building with space out front to park a hundred or so tractors.

    https://www.google.de/maps/place/map+auckland,+9++princes+street/@-36.847733,174.7701719,3a,75y,290.46h,90t/data=!3m7!1e1!3m4!1sj8HTOQJx8I9a9652hw6xzQ!2e0!7i13312!8i6656!4b1!4m2!3m1!1s0x0:0xcdeb577f7659b675!6m1!1e1

  3. Well that seems to have hijacked this thread, but it is still about the only thread where we can comment on the Paris Treaty and NZ’s lack of response.

    The idea of running smaller automatic trains made up of just a few trucks sounds attractive, but throws away some of rail’s advantages. One is air resistance. One long train has only one leading engine forcing its way through the air. Multiple short trains have multiple leading engines (or wagons) and therefore have much more air resistance, leading to increased energy costs – not quite so important if they can be powered from our electricity network.

    However the bigger advantage that would be thrown away by lots of small trains is safety. Trains have right of way, mostly because they don’t start and stop quickly.Having lots of small trains would be disruptive at the various road crossings, but with greater numbers of road-rail interactions, there would be more accidents where road users fail to give way to the trains leading to more injuries, deaths and costs. However trucks are also involved in accidents, so getting the trucks off the roads and the goods onto long trains should make life safer for other road users.

    I definitely agree about sorting out the electrification though.

    Trevor.

  4. BJ,

    From a concept perspective your ideas on rail converting to a self powered light (50 tonne?) truck wagon system, that would combine into longer truck sets with helper engines on rail, is entirely feasible. However to get to that point one first needs to separate the steel road network from the rail operations. It is hindering and killing today’s rail operations that trucking companies cannot operate their own train sets (or truck sets as you envisage) on the public steel roads. Just imagine if the trucking companies that are hauling logs from Gisborne to Napier could utilise the public steel road with their own trucks sets.

    The Gisborne to Tauranga rail link proposal makes me smile, imagine the number of taniwha’s that would be awakened as the new line wound it way through the Urewera’s. 😉

    The far cheaper alternative is to rail to Napier. If a transfer was needed to Tauranga, a roll on roll off coastal shipping service (just self drive the trucks sets directly onto the ship from the rail terminal) is a far better option. I’m sure the trucking companies that own Bluebridge would quite happily both invest in rail and road compatable trucks plus buy some more coastal roll on roll off ships. But first they need access to the steel road network.

    The steel road user charges would be ploughed back into opening up (all affected taniwha’s beings soothed with appropriate koha) new steel road corridors.

    Another option for self drive trucks is to dig up the steel roads and tarseal the ballast, letting the self drive trucks loose on the designated trucking network. That way old abandoned rail lines can be quickly bought back into service (Matamata to Thames comes to mind as does Kawakawa to Opua, etc.,etc,. )

  5. Rail = Challenge

    Here in NZ we are repeatedly told it is the most difficult place to build rail. It is also the most difficult place to build roads but that isn’t actually considered. important to the objectors.

    The question is whether we can improve on it. I think we can, but it is going to take a bit of work.

    First thing is to complete the construction and installation, according to a design that is intended for 21st century NZ rather than 18th century Britain. What do we need to do.

    1. Accept that we have hills and that a rail system needs to either find ways to climb them or build expensive damned bridges and tunnels.

    2. Determine some necessary completions (Gisborne-Tauranga for instance). Make a point of creating extensive double tracking

    3. Choose an electrification scheme and put it in throughout the system. The current hodgepodge creates massive problems to what is required to make this work.

    4. Integrate with short haul electric trucks.

    5. Design for trains and trucks that are driverless.

    6. Packetize the system with small electric “engines” similar to the truck design but getting electricity from the system wherever possible.

    7. Arrange and plan for each of these smaller engines to have the capability of engaging with a standard rack or cog rail installation.

    8. Complete difficult sections of track with the new engine’s capabilities in mind.

    Now the process is to load up the “truck” and let it travel the 150-200 km to a rail transfer point, where it automatically aggregates with any other trucks heading for a similar destination and loads up on a 2-3 car freight unit. When the 2-3 cars are full or within 3-4 hours the freight unit gets an engine assigned and is sent on its way. It may make sense to use the truck electromotive systems to power the freight unit, or to put batteries in the containers or to use a maglev capacity to help the containers to be transferred to the freight unit… but those are complexities I don’t care to explore tonight.

    By making the freight units smaller and more frequent the ability to climb grades makes the construction of the additional lines to get decent scheduling possibilities is much simpler. They are able to be built in NZ. They replace almost all long haul heavies,

    That’s my pitch. It requires substantial upfront investment but the end system is almost entirely fossil free, can be adapted to include passenger vehicles in the same routing, reduces handling and may be almost as fast from point to point.

  6. Pure CCS is unlikely to be cost effective in New Zealand, mainly because we can use renewable energy sources instead. However CO2 generated by industrial processes is often at a higher concentration than that from flue gases, and thus would be easier to capture and then store in our depleted gas wells.

    I find it ironic that the NACT government is happy to sign the climate change accord, but in the same week releases a report that says NZ Rail will never be economical. Well what chance does NZ Rail have with CO2 prices around $0.25 per unit? Once the trucking companies are faced with paying the full CO2 cost of the fuel they use, rail will look a lot more attractive – if it is still around.

    Trevor

  7. Fonterra’s debt is over 7.5billion.
    Fonterra’s board managed to almost doubled debt in just a few years, as milk prices where at record highs!

    4.666 billion debt (yes, point 666) in “medium term notes”.
    They confuse me with their reporting style, but I think they are paying 6.83% on this. (I was expecting 6.66% 😉
    Half a billion in bonds, unsecured investment pay 4.4% via NZX

    6.83% on today’s market can only be a ponzi scheme. But that must surely be unsecured lending 😉 or black n white crime.

    RadioNZ say total farm debt is 38 billion. If Fonterra where to pay farmers what they need, then Fonterra could surely be registered bankrupt.

    Fonterra would be a good buy for Landcorp NZ. Most of the 7.5billion debt seems like a straight right-off to me.

    http://www.dialogcrm.com/blog/2016/02/fonterra-needs-to-be-more-transparent-on-the-numbers/
    http://www2.fonterra.com/files/2016-03/fonterra-bond-offer-final-terms-sheet.pdf
    http://www.radionz.co.nz/news/national/298434/fonterra-what-shape-is-it-in

    If anyone would like to send regards to Bank Fonterra (technically via ANZ)
    here’s the address of their den:

    Fonterra Co-operative Group Limited
    9 Princes Street, Auckland

    A lovely masonic looking building with space out front to park a hundred or so tractors.

    https://www.google.de/maps/place/map+auckland,+9++princes+street/@-36.847733,174.7701719,3a,75y,290.46h,90t/data=!3m7!1e1!3m4!1sj8HTOQJx8I9a9652hw6xzQ!2e0!7i13312!8i6656!4b1!4m2!3m1!1s0x0:0xcdeb577f7659b675!6m1!1e1

  8. What’s troubling about John Wilson’s comments is that once again the Fonterra supertanker shows no sign of changing course away from its high pollution goal of growing milk volumes year on year.

  9. The Royal Society of NZ launched their Climate Change Mitigation Report on Wednesday 27 April with a morning long presentation from panel of some of those who worked on the document plus speakers outside of that group including Jim Shea from the UK who is a part of the chairmanship of current IPCC discussions.

    The report was not radical in any way and was tailored to be acceptable by the Govt of the day and so missed the mark in many ways.

    Predictions graphing emission from various sectors were shown and the effects of various mitigations with many being very indefinite. Some of these mitigations were dubious as was admitted by panel members.

    The prize presentation was that of the Agricultural sector. That presentation was basically a BAU with continued growth, and mitigations graphed were labelled broadly as efficiencies ( with no evidence presented backing them ) and the major one was a mythical vaccination to reduce methane production in the cows gut.

    The listed mitigations for agriculture were :

    water and energy use efficiencies,
    low nitrogen diet
    N fertiliser constrains
    Animal waste NO2 managements
    low CH4 breeding
    CH4 inhibitor /vaccine ( the largest even though it is not a current technology)

    Together with predicted growth of dairy, they did not reduce the emission level into the future.

    So the mitigation offered, was to attempt control of rising emissions above present levels with a very long term theoretical level which was not a reduction. No reflection of the Paris undertaking.

    As the Govt has a policy of increasing dairy and there is no path identified for reducing emissions of dairy to meet the Paris undertaking, the BAU with continued growth of dairy, will mean every other sector would have to subsidise Dairy with massive radical reductions if we are to meet the very inadequate NZ emission reduction promise.
    A mess that could clash with TPPA international settlements provisions. ( if we we so stupid to get aboard TPPA ).

    The presentation had no suggestion of moving from dairy/beef to cropping in any measure and no exploration of any alternative to cows in the agriculture section.

    This is a hopeless position rendering the RSNZ Mitigation Report pretty much a deception. In the report summary there are some loose wording around moving towards “lower emitting land use” but nothing exploring that as a possibility nor data suggested.

    The horticulture alternative was, and is ignored.

    There is a statement admitting that zero based emissions are not considered possible even in the long term especially with livestock based systems. Yet no examination of a non livestock based system.

    CCS was also offered as a solution in at least one sector. CCS was also regarded by some panel members as being very unlikely. The CCS process is not being used commercially anywhere in the world, the technology is untested and economically unlikely as a solution. Long term, CCS is completely untested and the captured CO2 storage is not regarded by many as anything more than a short term possibility.

    Jim Shea presented a UK model and a Scottish model of dealing with Climate Change mitigation. It is not left to politicians but a standing panel of scientific and other experts to make recommendation to Govt then monitor policies and outcomes.

    In Scotland they set emission goals at annual targets. No hanky panky there and they are reviewed rigorously and continuously with policy recommendation changes to meet shortfalls.

    In NZ we have nothing in place but a RSNZ pathetically tame report with no teeth.

    Water for dairy has no future and if we agree to lock ourselves to dairy then our future looks even dimmer.

    “A Royal Society of New Zealand expert panel is this week launching its report on a Transition to a low-carbon economy for New Zealand. Copies of the report, appendices, media release, an infographic outlining the many actions New Zealand can and should take now to reduce the threat of climate change and transition to a low-carbon economy, can be found on the Society’s website at”
    http://www.royalsociety.org.nz/climate-change-mitigation-options-for-new-zealand

  10. Isnt it interesting that NZ CONSTANTLY CHOOSES the LOWEST and WEAKEST business model. This is a result of employing LAY PEOPLE with VERY FEW work skills to run our country! MMP-Missing Mental Power!!!

  11. Excellently said from john with just one exception, the palm kern usage. That is the fault of Green policy on renewables, as it’s an oil crop in it’s main value. Or have prices dramatically changed in the last 5 years?, Think not, so time for the greens to take their pain on this one and see some ecological wisdom. sorry to haarp on… ooach, yeah hurt me when I learnt that one too.

    But as john says, action stations on organic farming or some low N system and all is good,… less chem… regionallbalblabla moana… before some small Bull breeders show up and release a herd outside the Fonterra main office !-)

  12. Environmental disaster just doesn’t figure in the mortgages for intensification, the importation of fertiliser to further damage the soil and create more land with toxic residue making herbiculture dangerous to humans. Polluted ground water, waterways filling with increasing pollution are an existing growing deficit for NZ with no cost born by the dairy industry polluters.

    But also we have to count in emissions and the destruction of forest to grow palm kernel.

    About 2 million tons imported for intensive dairy.

    http://farmersweekly.co.nz/article/record-palm-kernel-imports-to-new-zealand?p=212

    NZ is digging a hole for itself.

    Dairy must reduce in time and that may not be far away. It is not a long term option any where near present levels and irresponsible governance.

  13. What do workers at the Fonterra offices think? Is there any desire from within to remove the board? Do stakeholders need political support, to know that farms will be backed by govt, if farmers vote for insolvency? Would a Green Govt be willing to buy fonterra back as a state run company, at least until the cooperative ownership and governance of Fonterra can be regionally-re-constructed? Debt could be written off, where Fonterra’s lenders are also bankrupt… Could be a good cheep buy for Reserve Bank NZ, and with debt default, payouts would break even again.

  14. Long term prices? I reckon in about 30-40 years the prices will be seriously higher, but the ability to produce more will be significantly smaller and the ability to ship it across the big ocean is going to be even more significantly higher.

    It’s all bad deals. Fonterra likes the TPPA too. Should be a big warning sign for everyone.

    Back in the 1960’s we had something like “free trade” set up with the Mother Country. England paid a steep price for our stuff and we did the wool and butter export business almost exclusively. It sort-of worked, New Zealand the plantation. When it ended the economy collapsed. So was it good?

    Then we had the Muldoon years, which were toast on a stick and we remained sheeplike but broke and the Unions were in control of our import licensing schemes and our economic tools were not real sharp. At the end, in desperation perhaps or as a flash of insight Muldoon came up with the some projects to get New Zealand producing something other than wool. That this gem was buried in the fertilizer that marked the other features of his tenure is a bit of a shame. New Zealand came within a decade and a Union Movement of being able to produce many of the things we consume. Not just dairy and sheep deals.

    Instead we had Rogernomics, economic scaremongering (it is impossible for a sovereign state to actually go bankrupt), and a massive lurch to the other side of the road. Rather than attempting to produce things that we consume, we became averse to anything that smacked of subsidy or support of any industry we actually could use. So we went back to emphasizing our “competitive advantage” in ways that Ricardo himself had rejected when he invented the concept. Wool, cows and milk.

    This market too is doomed… this time by Mother Earth rather than the economic minions of the Queen Mother.

    …but it would not in the long run work, even without the events that are external to the market the same way Godzilla was external to Tokyo.

    Free trade doesn’t really exist though, and THAT is why it is a notion that is doomed from the start.

  15. It saddens and disappoints me that Fonterra cannot see past their goal of being a 30 billion litre a year milk suppliers, when its farmers are already bleeding, and in many cases, going to the wall, because the business is simply not sustainable at the current pricing level, and no-one has put forward a credible reason why prices will improve substantially over the long term. Any business that is in low value commodities is very exposed to the vagaries of world trade, most of the time it is a crap shoot.

    I may be wrong, but it seems to me that the lemmings are charging to the cliff, and we all know how that works out.

Comments are closed.