Fonterra Australia addresses 2022-23 dairy season

Fonterra’s future, sustainability and on-farm investment have been revealed. See their plans.

A shake-up of Fonterra Australia’s operations has been postponed indefinitely as corporations take stock of the volatile economic climate.

Fonterra Australia managing director Rene Dedoncker confirmed the deferral at an industry breakfast it hosted in Melbourne today.

A panel discussion featuring the Fonterra boss also touched on surging consumer demand for dairy, inflationary pressures on farmers and recently announced carbon regulations in New Zealand.

In September 2021, Fonterra announced an ‘ownership review’, heralding the biggest change to its operations in Australia since it entered the market 16 years ago.

Management floated an initial public offering as its main option with a pre-Christmas 2021 deadline set at the time.

But Mr Dedoncker said businesses big and small were taking a more cautious approach in light of the recent economic downturn.

“I don’t think any company is out there at the moment looking at executing future options in an uncertain world where investors firmly have their wallets in their pockets,” Mr Dedoncker said.

“Our job is do a couple of things: one is to be really clear on the investment requirements we’ve got to keep our business relevant, vibrant, and we’ve got a board that’s supporting that with relevant investments.

Fonterra Australia managing director Rene Dedoncker, Fonterra farm source manager Matt Watt and Fonterra suppliers council chairman Alan Davenport in Melbourne today.

“And the other bit is to have a state of readiness, which is why the ownership review continues. But the reality is the markets are as such that there is limited activity and it would not be appropriate for any business, frankly, to be playing in this market environment.”

Fonterra farm source manager Matt Watt and Fonterra suppliers council chairman Alan Davenport joined Mr Dedoncker in the panel discussion at RACV’s Melbourne headquarters.

Mr Davenport said Fonterra deserved wider industry recognition for its investment in supplier and environmental sustainability.

“The investment (Fonterra) are making in farm source and the sustainability space, supporting farmers, is huge compared to their competitors,” Mr Davenport said.

“Historically, we would have seen more recognition of that in terms of stickiness of supply.

“From what I can see in the competitive environment for milk at the moment, they’re the only company standing up. I don’t think, at this stage, they’ve received the recognition for it.”

In recent weeks, New Zealand’s government has floated a carbon tax on livestock within three years. Under a draft plan, put together by the Ardern government and the Federated Farmers of NZ among other groups, farmers would have to pay for livestock gas emissions from 2025.

Mr Watt said Fonterra Australia had worked on a number of environmental initiatives as consumer expectations over dairy sustainability change.

“For various reasons, we’ve not had the same social and political pressure in what New Zealand is seeing in terms of the way dairy operates here versus there,” he said.

“But that doesn’t mean (new carbon regulations) may not happen and that’s why we’ve been ahead of that in terms of the programs were developing (for sustainability).”