National MP says its time to change Fonterra

Last year the weekly newsletter “Trans Tasman” gave one of its lowest back bencher ratings to Taranaki-King Country, MP Barbara Kuriger.

Not only was Ms Kuriger surprised by the rating but so were many of her colleagues.

But maybe that’s because of what she is; effectively she is the MP for dairy farming. She may be relatively low profile in the incestuous world of Wellington politics but within farming she is a formidable figure.

She has a high powered background in a range of farming organisations including being Dairy Woman of the year and a member of the Fonterra Shareholders Council and the board of Dairy NZ, she can speak with considerable authority on the industry.

Add to that her electorate which stretches from Raglan to Stratford and she probably represents ns more dairy farmers than other MP.

John Wilson, the chair of Fonterra, is a constituent as are a list of former directors and a couple of other current directors.

Perhaps surprisingly, though she concedes there’s a lot of stress in the dairy farming community, she believes the majority of people will get through.

But she worries about young people working on farms.

”When you’ve got a husband and wife team who have decided to employ somebody and then things have got quite tight and the employee tends to be the first victim,” she says.

“There’s lot of ways people are looking at protecting their businesses but I am really worried about the number of young people we are going to lose out of the industry.

“That’s going to the hardest part of all of this.”

Ironically many of the young people she is talking about came to dairying when other parts of the agricultural sector were shedding staff after the financial crisis of 2007-08.

So now she is trying to find ways that those who lose their jobs might be able to be placed in other agricultural jobs.

But though the first impact of the dairy price drop is obviously at the human level, there are also some hard questions being asked in rural New Zealand about the structure of the industry and particularly the role of Fonterra.

At the beginning of March the Commerce Commission effectively kicked off a review of Fonterra’s governing legislation, the Dairy Industry restructuring Act, by delivering a report to Primary Industries Minister Nathan Guy on the state of competition within the dairy industry.

The Minister has called for submissions on the report and he has until 2018 to enact any legislation that may be recommended.

They key recommendation within the Commerce Commission report is that Fonterra no longer be required to accept all the milk that is offered to it.

That may not be quite as relevant as it was when conversions were in full swing and milk production was increasing each year.

Now the conversions have slowed and Ms Kuriger says many of her constituents have also got rid of some of their herd to keep costs down.

But if Fonterra no longer has to accept all the milk then some of the pressure that has been on it to put capital into stainless steel processing plant rather than downstream processing or marketing will be relieved.

There’s a downside risk for the Government though and that is that implementation of the proposal could slow the growth of milk production.

Ms Kuriger believes that as the industry adapts to long term lower prices it will impact milk production anyway.

“We won’t see the growth in milk like we have done,” she says.

She says that the rural MPs within the caucus and constituents at every meeting she goes to are asking questions about the review.

But she goes further and suggests that it may be time to look at Fonterra’s own structure.

“There’s the argument from farmers who say, yes it is a co-operative but do we need to have the majority of directors as farmers to keep control of the company.”

“What that did was give a very clear message to Fonterra that maybe we should have a look at the way we do govern our organisation.

She says the vote at the last annual meeting to shrink the size of the board which did not reach the threshold which would have implemented it still got 53% support.

“The co-operative principles have worked extremely well for us and we would want to make sure they remained but at the same time it doesn’t mean we have to have a majority of co-operative farmers on the board.”

Farming as a whole though faces other challenges aside from the current dairy price fall.

One of the biggest issues on the Government’s agenda is resolving the current impasse over how water should be allocated.

There are competing claims from Maori, irrigators and other users and farmers who already have water rights.

“it’s not going to be an easy issue to resolve, particularly the historical rights, not just Maori rights but also the grand fathering of existing users.

“There’s a lot of discussion to be had and the feedback that is coming back in on the consultation document  indicates there’s a lot of fear about how it is all going to work out at the end of the day.”

This makes her an advocate for water storage, which is often a Government euphemism for irrigation.

The other big rural issue at present is the Resource Management Act changes.

Whereas some provincial MPs have reported that here is concern within their electorates about the deal the Government did with the Maori Party and the additional power Maori may get in the consenting process, she says that is not an issue in her electorate.

“It is not really an issue at all.”

Instead her constituents are concerned about the difficulties and delays in the consenting process and she says a lot development simply never takes place because people are put off by the process.

And ask her to nominate the long term policy issue of most concern in her electorate and she names ultra-fast broadband.

It has the potential to impact on everything, the recruitment of young people into farming, medical services and the new generation of technology which is starting to come on to dairy farms.

This is a far cry from the kid of image portrayed by her predecessor, Shane Ardern, who became notorious after he drove his tractor up the front steps of Parliament o protest against the “fart tax” (including agriculture in the Emissions Trading Scheme.)

It is a sign of how different farming is today that the political party that was once described as the political arm of Federated Farmers should have as one of its key rural MPs a woman who wants to reform Fonterra and talk about ufb.

That’s why knee jerk analyses of the current crisis in dairying will not work.

But it also means National’s back bench rural MPs are going to have to continue to keep their front bench in touch with rural feelings and aspirations over the next year or so as the crisis works its way through.

Ms Kuriger intends to do that.