Greens challenge Fonterra

Written By: - Date published: 10:01 am, June 3rd, 2008 - 10 comments
Categories: greens - Tags: , ,

Good to see the Greens coming out with a relevant, populist message at the weekend’s conference by tackling the issue of food affordability. The Greens have great policies but far too often they’ve got themselves bogged down in the detail and been seen by voters as irrelevant on hip-pocket issues.

But while the challenge to Fonterra is good for the Green brand don’t expect it to make any difference to the price of dairy. As Fisher & Paykel has shown us, businesses exist to maximise returns to their shareholders, not to show the public they’re “a good Kiwi company.” To change the behaviour of business you need to regulate, and that’s something that was noticeably missing from the Greens’ message.

The Government’s reaction was worse than disappointing. I’ve come to live with the Government’s tendency to be timid and defensive when under attack but the last thing I expected was to hear Jim Anderton advocating trickle-down theory on Morning Report.

Empty rhetoric or more of the same? Sometimes it’s hard being a leftie. Thankfully the rest of Jeanette’s speech has some answers.

[Hat tip: frogblog]

10 comments on “Greens challenge Fonterra”

  1. higherstandard 1

    Tane

    I recall the CEO of Fonterra saying that they already sell their product in NZ cheaper than elsewhere in the world.

    Personally I don’t begrudge dairy farmers one cent of their income as it’s a damn hard occupation and they earn every cent and Yes they are a good kiwi company and will remain the backbone of our economy for the foreseeable future .

    As an aside I buy my two litres of milk for $2.50 have done for a long time (and that’s Milford in Auckland) perhaps rather than Fonterra the profits are being skimmed more agressively elsewhere ?

  2. Lew 2

    HS: “perhaps rather than Fonterra the profits are being skimmed more agressively elsewhere ?”

    Federated Farmers made this argument recently. I’m not sure of the veracity of their data, but it strikes me as unlikely that the highly-competitive distribution and retail links are responsible for the price rise, when the production link is a practical monopoly.

    Fonterra and dairy farmers are entitled to their hard-luck line arguing that they’ll only discount domestic prices in boom times if domestic consumers agree to accept high prices during bust times, to support the farmers. But to an extent they have the government of the day over a barrel, since none would allow the co-operative to fail, even if the price of milk fell through the floor, NZ would end up paying for it one way or the other. Such is the cost of the massive benefit that Fonterra has

    That said, the Greens’ line here is basically a symbolic stand designed to make them look tough, which will cost them credibility among business and farming groups (no love lost there anyway) in exchange for support among those feeling the food-price crunch. There’s a certain irony in this given their insistence on stringent ETS regulations which would drive costs yet higher (not that I necessarily disagree that that’s needed). This specific issue will take very little shooting down, but the overall `get tough’ campaign might be more resilient.

    L

  3. Tane,

    Keith Ng had a response to this – refuting a lot of the “facts” used and calling out the Greens for “managing to marry pre-Rod Donald naivety with Winston-like populism.”

    It seems like the Greens have been caught out on this one – not surprising as they don’t often indulge in deception to get their point accross.

    Perhaps the most interesting fact from his fisking is this:

    Second, even if food affordability is an issue, targeting dairy is nothing short of irrelevant.

    Milk, cheese and eggs make up 1.2% of household expenditure, according to the 2007 Household Economic Survey. That’s $11.60 per week. Even if Fonterra capped dairy prices at 2007 levels, how much are households expected to save? $1.20? $1.80?

    Which he appears to be drawing up this whole dairy debacle as a rather poor straw man.

    You can read his article here. Would like to hear your thoughts on it…

  4. Tane 4

    Thanks Chris, I hadn’t seen the article. Busy now, but will get back to you when I’ve had a chance to read it.

  5. Lew 5

    Err, my second paragraph should end “Such is the cost of the massive benefit that Fonterra has provided the NZ economy.

    L

  6. erikter 6

    The Greens are a threat to New Zealand’s economic well-being using environmentalism as a cause.

    The water tax is to cause more damage than good. However, the idea of Fonterra selling goods at a lower price in NZ is lunacy.

    Fonterra will sell the goods at the price the market is prepared to pay and not by government decree or intervention as the Greens suggest.

    Norman and co. ought to leave their sheltered lives of academia and experience the real world!

  7. Tane 7

    But erikter the Greens didn’t suggest government decree or intervention. That’s the point of my post.

  8. erikter 8

    “The Greens say Fonterra should drop prices to a price that our people can afford. Is this a 5%, 20%, or 50% drop?

    It might make the hand-wringing Greens feel good to say this sort of banal statement, but what are they really asking for? The only sustainable way to price goods is by international markets. Anything less and you are on a slippery and unsustainable slope.’

    I’d never expected to be in agreement with Jim Anderton, who said the above words, but there you go.

  9. Ari 9

    I find it hilarious that all these other parties sop to people paying high prices on food but then call out a non-policy- merely a plea- as being so irresponsible after they’ve consented to emptying the budgetary war chest on tax cuts, ostensibly to help with living costs.

    You do not get to have it both ways, laddies and gentlewomen.

  10. Macro 10

    I find it rather rich that the fed farmers can come out and say ” we already subsidize dairy products in NZ to the tune of about $15m per year” – when with the introduction of the ETS (under which agriculture is omitted until almost 2018 when they will finally start to pay for their Carbon emissions) – the NZ tax payer will be subsidizing farming to the tune of Billions!

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