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Fonterra has appointed a new head of its global commodity business with a mandate to maximise returns from record dairy prices.
But his predecessor has warned against giving in to the short-term temptations of selling as much commodity milk products as possible, saying such a tactic could harm the company's value-added business, which includes branded consumer goods.
The co-operative said yesterday that sales and operations planning director Kelvin Wickham would replace dairy industry veteran John Shaskey as Fonterra Global Trade managing director at the end of June.
Wickham will take up a position that has been whittled down to focus on maximising the commodity value of Fonterra's milk. The responsibility for getting that product from manufacturing sites to global markets is now with group manufacturing director Gary Romano.
The role lost oversight of the value-add business last year when Fonterra Ingredients was split in two, a move that has delivered a clearer management structure according to Shaskey, who is leaving the company after 30 years in the dairy industry.
Shaskey said that although there were "ample opportunities" to move milk in commodity form, it was important to develop long-term, added-value opportunities as well.
The more raw commodity Fonterra sells on the global market, the more its value-add business has to source commodity at the same inflated prices.
Within a year, global skim milk powder prices have doubled in US dollar terms and risen 72 per cent in local dollar terms, driven by factors including increasing demand from China and the Australian drought.
"You could almost sell everything you produce at the moment in commodity form but at the expense of long-term opportunities to develop value-added areas of business," Shaskey said. "Of course that would be quite silly in terms of the impact it would have on the longer-term nature of your business."
