'Tighten your belt' call to dairy giant

Photo / Christine Cornege

A Marlborough farmer wants Fonterra to stop investment spending and cut staff salaries until milk prices improve.

Murray Beach, from Havelock, has put forward the proposal, which will be considered at the dairy co-operative's annual meeting in Palmerston North next month.

Fonterra said the proposal would mean no investments or development projects could be made until the farmgate milk price, now forecast to be $5.30 a kilogram of milk solids, reached $7.

The co-op has recommended that shareholders vote against the proposal.

Beach said he was concerned about continued spending "especially at times when the farmer needs money".

Fonterra said in August it would spend $615 million to buy up to 20 per cent of Chinese infant formula maker Beingmate Baby & Child, and $555 million developing processing capacity in Waikato and Southland.

The investments will be debt-funded.

"In my opinion, we can't afford these ventures," Beach said.

The forecast farmgate milk price has slumped to $5.30 a kg from last year's record $8.40 because of falling global dairy prices.

Because of this drop, Beach suggested, Fonterra staff should take pay cuts ranging from 10 to 25 per cent depending on the size of their salary.

"A temporary committee could be formed to look at all other costs to fine-tune the co-op," he said.

Beach said he put forward the proposal to see if other farmers felt the same way.

In response, Fonterra said the proposal would adversely affect its efforts to increase value-added exports and address processing constraints in New Zealand.

The Fonterra Shareholders' Council has also recommended that farmers reject Beach's proposal.

Federated Farmers dairy chairman Andrew Hoggard said many farmers were unhappy about falling milk prices.

"But I think that, in a large part, farmers realise it's a result of what happens when supply is greater than demand," he said.

Hoggard said it was important that Fonterra keep investing for its future.