Sunday, February 22, 2009
FONTERRA PUSHING THEIR LUCK A BIT...
First published at Qassia:
Fonterra pushing their luck a bit...
Fonterra is New Zealand's largest company and in the top six dairy companies in the world. It is no small fry in the wider scheme of things.
While Fonterra was embarrassed by its involvement in the Chinese melamine milk scandal in China last year, through its involvement with a Chinese dairy company, it was not actually involved directly in exporting dairy products to Chinese companies. However Fonterra paid out about $NZ200 million in compensation. Six babies died and about 36,000 others became seriously ill through the melamine contaminated milk powder their mothers gave them. The melamine caused kidney stones in thousands of Chinese babies.
Three Chinese nationals directly responsible for adding melamine to milk products received the death penalties, and others were imprisoned for an number of years or received life sentences. Melamine is normally used in plastic products and should not have been added to food products in any form at all.
Back in New Zealand Fonterra distributes and sells dairy products on behalf of its farmer producers; probably up to 95% of all dairy farmers are Fonterra's clients. It certainly didn't help the image of New Zealand overseas as well.
During recent times the dairy industry had been booming in New Zealand, with many farmers changing from meat and wool to dairy products. But the economic tsunami now sweeping the world has harmed Fonterra and its farmer clients in no uncertain terms as well. Dairy prices are plumetting and a few farmers may now be wishing they had stayed in the meat and wool industry, rather than switching to the dairy market.
The increasing returns for farmers in export markets in recent years resulted in soaring domestic prices at the supermarkets. Many customers switched to cheaper butter alternatives such as margerine. While some prices have fallen, they are not being reflected by any increases in demand for dairy products.