Fonterra: Keep farms in Kiwi hands

Sir Henry van der Heyden (left, with Andrew Ferrier) is adamant land and production must stay in New Zealand hands. File photo / APN

New Zealand cannot afford to lose control of its land, says Fonterra chairman Sir Henry van der Heyden.

"I've been a passionate advocate of keeping control of our pastoral land and productive resources," van der Heyden said at the dairy co-operative's annual meeting.

"I want to see as many farms as possible stay in local ownership, supplying milk to Fonterra."

The global demand for food meant New Zealand was being eyed up as a production base, he said.

"Keeping our farms and other productive resources in local hands is about protecting our competitive advantage in the world - we need to keep as much of the benefit as we can here in New Zealand."

Overseas capital was needed to grow the economy.

"But that capital doesn't mean we have to give away control or ownership of our farming businesses," van der Heyden said.

The ability to grow grass, turn it into milk and then into the highest-quality dairy products more efficiently than anyone else, was the point of difference, he said.

"This is where we lead the world.

"We simply cannot afford to lose focus, lose our edge or the control of our productive resources, our land."

The global economy was relatively weak, with a potential for economic slowdown, and the high dollar continued to hurt a lot of exporters, van der Heyden said.

"There's a lot of volatility in global markets. But dairy's fundamentals remain good on both supply and demand sides."

Long-term prospects were bright and dairy consumption was increasing faster than global population growth.

In June, farmers approved plans to trade shares among themselves, rather than with Fonterra, to remove redemption risk and provide permanent share capital.

The company expected to hold meetings early next year to update farmers and trading was not expected to begin until late in 2011 at the earliest.

Chief executive Andrew Ferrier said the company had succeeded this year despite the conditions, rather than because of them.

"From my perspective, Fonterra has really hit its straps this year," Ferrier said. "We achieved a lot at a time when many companies were still trying to fight their way out of the recession."

Debt of $4.5 billion as at balance date was more than $700 million lower than the previous year, while the gearing ratio was under 45 per cent, down from 53 per cent.

"We're on track to achieve our goal of targeted savings of $200 million in our supply chain over the three years to July 2011," Ferrier said.

During 2009/10, Fonterra collected 14.7 billion litres of raw milk from 4.5 million cows, about 89 per cent of national milk production.

The forecast for the 2010/11 season is $7-$7.10 a kg of milksolids before retentions - a $7.10 payout based on stable production levels could be worth $9.1 billion.