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Fonterra job losses just the beginning?

Written By: - Date published: 11:11 am, July 17th, 2015 - 40 comments
Categories: farming, jobs - Tags: , ,

Terrible news for the 523 Fonterra workers who are losing their jobs – I’m sure everyone here at The Standard wishes them well.

Fonterra axes 523 jobs in a bid to cut $60m in costs

Fonterra has cut 523 jobs as the company tries to reduce its payroll bill by up to $60 million a year.

Chief executive Theo Spierings said the news had been unsettling for the people affected but the co-operative had to change if it was to remain strongly competitive in the global dairy market.

Speaking of the global dairy market:

Kiwi dollar falls as dairy prices plunge at latest auction

The latest GlobalDairyTrade auction was a shocker, the GDT price index dropping by 10.7 per cent from the last sale a fortnight ago and with wholemilk powder prices registering their biggest fall in 12 months

Whole milk powder – which is responsible for about 75 per cent of Fonterra’s farmgate milk price – fell in price by 13.1 per cent to US$1,848 a tonne to its lowest level in six years.

AgriHQ dairy analyst Susan Kilsby said the auction result was “disastrous”. “Farmers now face two consecutive seasons of extremely low milk prices,” she said in a commentary. “The majority of farmers can’t break-even at such a low milk price.”

Economists estimate a $1/kg drop in the milk price equates to about $2 billion less income for dairy farmers. “Farm debt levels will rise. Rural communities will suffer as farmers reduce spending to the bare essentials,” Kilsby said. …

The current job losses may well be just the beginning.

40 comments on “Fonterra job losses just the beginning? ”

  1. Sirenia 1

    Really sorry for them. Many of them are likely to find out how difficult and unwelcoming Work and Income processes can be. They will get to understand the stigma of unemployment and that it is all the unemployed person’s fault and not the responsibility of the state to do anything about job creation. Maybe some will revise earlier assumptions from the days when they were securely employed.

  2. Colonial Viper 2

    Fonterra has cut 523 jobs as the company tries to reduce its payroll bill by up to $60 million a year.

    Or to reframe it: to remove up to $60M a year from workers’ family incomes. And I think you are right, Anthony, the economic pain in the provinces from the dairy crash is just starting.

    • dukeofurl 2.1

      Its mostly head office staff, IT, support, and clerical, management.

      not that it’s any better for them

  3. Tiger Mountain 3

    yep, no fun being down and out in Nu Zilund or in the Fonterra workers case, a newly minted “jobseeker”

    all the degradations, frustrations and minor humiliations known to hundreds of thousands of kiwis will likely be visited by WINZ on this group, and the banks will not seem so friendly or keen to push those extra “products”

    if their partner is working, even part time, they will not be able to get a “job seeker” benefit in their own right and so on

    on a more positive note over the last year at Fonterra Canpac in Hamilton there was a redundancy situation affecting initially 114 workers, after around half took voluntary redundancy the rest negotiated redeployment to other Fonterra sites meaning no compulsory redundancies, this was effected by union members with a strong delegate system

  4. RedLogix 4

    And guess what happens next time Fonterra need their ‘support staff’ to monitor, diagnose or react to something like the botulism scare a year or so back?

    These people were not all sitting about twiddling their thumbs and sipping lattes – this is a dramatic and damaging hit to Fonterra’s capabilities.

  5. Ovid 5

    Between 2003 and 2013, world milk production increased from 518 million tonnes to 635 million tonnes (NZ’s production increased from 14 million to 18 million tonnes) – source.

    A 22% increase. In the same period, world population increased from 6.335 billion to 7.125 billion. A 12% increase.

    • Colonial Viper 5.1

      The key is what is happening to some of Fonterra’s major markets. The Chinese for instance have long had form in acquiring skills and technologies that they want for themselves – and in my view, that is what they have done to NZ with dairy over the last 10 years, with all their joint ventures and dairy operations they have started up over here.

      And Key was stupid not to sign the FTA with Russia due to US pressure. Now, Russia has signed a deal for China to supply a massive amount of dairy to Russia – using 115,000 hectares of leased Russian land in the Transbaikal region. NZ totally cut out thanks to the short sightedness of our elites.

      China has started to build a joint Chinese-Russian livestock agricultural complex. A hundred thousand cows are planned to be bred in a project costing one billion Yuan.

      http://www.rt.com/business/270463-china-russia-milk-farm/

    • Lanthanide 5.2

      “A 22% increase. In the same period, world population increased from 6.335 billion to 7.125 billion. A 12% increase.”

      And?

      What was the increase in people:
      1. Willing and wanting to consume milk
      2. Who could afford to pay for it

  6. Gutted for the families and whānau and communities who are bearing this awful news. Sadly this is just a foretaste, a beginning of what many many people will experience and have to suffer as the domino’s fall.

  7. Brigid 7

    If they want to reduce their payroll bill by $60 million a year, why not sack a dozen or so managers.

    • Colonial Viper 7.1

      Like the ones who got them into this mess in the first place.

      • tc 7.1.1

        That never happens CV as the club looks after its members. this is mere tweaking when major surgery is needed.

  8. DH 8

    You have to wonder what these senior managers actually do to earn their generous salaries. A CEO who couldn’t see this coming, and prepare contingency plans, really shouldn’t be there IMO.

    I can recall a friend who was in market gardening back in the days when most produce went to auction. Knowing what crops to plant for the next year was a big part of the business; those who picked it right made the most money.

    The trick was to think smart and not to pick the same crops as everyone else. Most growers planted the crops that fetched the highest prices at the last auctions. That created a glut and those crops tended to fetch the lowest prices at the next years auctions. Many growers habitually forgot that the high auction prices were caused by a relative shortage and when everyone started to supply that crop the shortage turned into an oversupply which crashed the price. The exact same thing looks to have happened here with milk powder.

    The point being that the fall in price was predictable and the senior management team should have been prepared for it.

    • Colonial Viper 8.1

      You have to wonder what Fonterra’s board of directors was thinking. Highly paid, not too smart.

  9. Rolf 9

    Unfortunately the signature Colonial Viper above is very right there, but the problem is much bigger. The Chinese are quite open about that they want to deal and trade with those who demonstrate that they are friends of China, and New Zealand has position itself as a worst enemy who covering up and lying. Not only have we had the AFFCO and Richina disasters, plus a quite a few other never reported, we had the student disasters, melamine, fertilizer in milk, botulism, 1080, and doing the worst possible, being a US lackey spying on China. New Zealand has poked the Chinese in both eyes too many times. I live in China and I personally see how kiwi products are disappearing from the shelves. People just don’t want to buy from the devil. It matters in China.

    • Colonial Viper 9.1

      And the Chinese think that our current Government are idiots. And now they find the main Opposition party playing fast and loose with anti-PRC sentiment. The same main Opposition party who signed the Free Trade Agreement with them.

  10. Prickles 10

    I could never quite understand why the Chinese took so much of our milk powder anyway – it is traditionally not a part of their diet and the many Chinese people I know here in NZ and internationally very rarely consume it.

    • Colonial Viper 10.1

      Yep – cows milk is definitely not favoured in the Chinese diet.

    • Naki man 10.2

      Prickles
      Most people wouldn’t know that they are consuming milk powder its not all reconstituted.

      • Prickles 10.2.1

        Still has to be digested though and many Chinese are lactose intolerant. It wouldn’t take too long to realise that they were eating it even if it was hiding.

  11. esoteric pineapples 11

    I’m quite pleased dairy prices are falling. My favourite childhood river is under threat of having one of its two major tributaries dammed and all the rivers in the region polluted by run off. The lower and longer dairy prices stay low, the less economically viable the dam will be. Although I wouldn’t mind betting they try to go ahead with it anyway on the premise that high prices will return. These sorts of people are more interested in the profits to be gained up front, than the long term cost ratepayers etc.

  12. Enough is Enough 12

    Hopefully this crash kills the dairy industry and we can return to a more sustainable way of living.

    More importantly though lets hope this triggers a recession that sends the Tory filth the political extinction.

    • maui 12.1

      I hope I’m wrong, but I think a recession may just consolidate National as the chosen ones to lead us out of the mire. It may have to be a depression before people start looking seriously at going in a different direction.

  13. Scotty 13

    Unfortunately, Fonterra now have a CEO whose only solution to tough times is to take the knife to staff numbers.

    He’s not particularly well liked in the business, you only need to look at the turnover in his senior management team since he arrived.

    • Colonial Viper 13.1

      Indeed. Blame the shitty short sighted board for hiring him.

      • Redelusion 13.1.1

        I tend to agree why you need to pay a bloke millions to make milk powder, a pretty simple process and put it into a bag, set the price by auction with the only differentiation it comes from nz is beyond me likewise employ a whole lot of other blokes earning shit loads in a swanky down town office I also struggle, hence why getting rid of 500 white collar staff is probably not hard

  14. Michael 14

    I’m not worried about the Fonterra managers and technocrats who get the arse – they will find work elsewhere within the global economy. I am worried about dairy farm workers, Fonterra manual workers and people who serve the dairy industry in our regional cities and towns (nearly everyone who lives there) – they will bear the brunt of the dairy crisis and they are the people least able to survive it. I guess it’s just as well the political class (National and Labour, plus a fair chunk of the Greens caucus) have given up on the people living in the regions (judging from their actions not their words) and confine their activities to metrpolitan voters. Playing the race card and blaming Chinese people for residential property prices in our biggest cities is much more fun than devising progressive solutions to structural economic problems isn’t it?

  15. Reddelusion 16

    Great the left have declared another crisis, should be all good soon Milk powder is a commodity, prices go up prices go down, what was price of oil 5 years ago during peak oil ( what happened with that crisis !) . Just chill, the price will come back. A low dollar ( the high dollar was also a crisis) as result of dairy struggles is benefiting a lot of other sectors including one of your favourites good old fashion manufacturing ( what ever happened to that crisis) , likewise other part of agriculture, sheep beef, wine ….. Bloody cold for th last month, snowing in Queensland, prediction of mini ice age in 15 years ( what ever happened to climate change crisis). My point and on a more serious note stop worrying about shite, even national will loose power eventually. As they say worrying about stuff that probably won’t ever happen is pointless and if it does, just deal with it, stop fretting, 😀

    • Colonial Viper 16.1

      What do you think of China leasing 115,000 hectares of land from Russia to build one of the world’s largest brand new and modern dairy farms?

  16. Redelusion 17

    not much, the world is a big complex place, things happen, competition, technology moves on, and there are always unitended consequences Maybe 20 years from now we look back and find this was the time frontera realised simply making bulk milk powder maybe is not the best strategy. maybe the demand for protein due to pop growth takes off again, maybe new technology and uses are found for milk and its extracts, maybe another industries take off due to low dollar. My point as per above is chicken little syndrome a crying crisis to every isolated potential bad thing is pointless, there is always upside, eg I bet Cullen fund and peoples kiwi savers are looking a lot healthier with fall in nz dollar, people are going to buy less junk, less polluting dairy conversions etc…yes petrol goes up but possibly forcing more people onto public transport, again not always a bad thing .

    • keyman 17.1

      except your national government has failed to diversify the economy away from speculation and basic primary commodities they are fukwits the dairy milk glut is predicted to last a decade the arrival of mega dairy has removed nz production cost advantage

  17. Ad 18

    You guys should also investigate other areas throwing $100k+ jobs out the window.
    Eg that big Air New Zealand engineering shift.
    Eg the huge Auckland Council, Auckland Waterfront, Auckland Property, and Transport restructures.
    Eg the Au mining and manufacturing collapse.
    Those salaries and their families are the ones that hold up much of our service (travel, education, high end luxury goods) economy.

    As well as being our coldest winter in a generation, this is the hardest and fastest economic slowdown winter since 1989.

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