The Country 05/12/24: Miles Hurrell talks to Jamie Mackay

The chief executive of Fonterra celebrates breaking the grass ceiling with a record $10 forecast milk price. Plus, we look at how to ramp up dairy production to double primary industry exports in the next decade.

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Episode Transcript

Speaker 1 (00:00):
It is a great day for New Zealand farming, for
the New Zealand dairy sector, for the New Zealand economy,
for New Zealand, and a ten dollars milk price. Back
in the days Henry vander Hayden used to be the
chairman of Fonterra. He would traditionally come on to this
show just before Christmas and lift the milk price. I
nicknamed them Henry vander Claus. Today I've got the chief

(00:23):
executive of Fonterra and I think Miles Hurrel Miles High
Club doesn't sound too bad for you with a ten
dollar price? What do you reckon?

Speaker 2 (00:32):
You kill, Jamie, I've been called worse, so whatever works.
But as you say in you intro, what a great
day for to be a dairy farmer in New Zealand
to put out a forecast of ten dollars To your credit,
you've been calling it for a few weeks now, But
great that we can get out there, which is just
goes to show the markets in pretty good shape. At

(00:53):
the moment I thought I might.

Speaker 1 (00:54):
Have weaseled it out of commal mystery Meta What a
bright woman she is too. On yesterday's show, almost got there,
but she kept the power to dry.

Speaker 2 (01:03):
Yeah, well, I mean she she would have obviously had
a feel for where GDT was at and the last
few weeks and how the market had moved. But you know,
these things only get signed off late late in the
evening with their board last night, so she wouldn't have
been privy to it yesterday anyway, but she certainly would
have seen the riding on the walls the market was moving.
So say, good news.

Speaker 1 (01:21):
Okay, let's put this number into some sort of context.
What does a ten dollar milk price mean for the
New Zealand economy. I'm sure you've crunched the numbers on this.

Speaker 2 (01:29):
Yeah, well, you know, for sixteen billion of milk price,
of course, not notwithstanding the unions that will have a
look at as well. So you know that's a good
news story when you look at you know, Vance that'll
step up again December page January another sort of five
hundred million dollars into farmer's back pocket. So you know,
it is good news at a time when quite frankly,
New Zealand still you sort of dragging it heals, if

(01:51):
we can say that. So, you know, good old New
Zeerald farmers are doing us proud, so good on them.

Speaker 1 (01:56):
Well, instead of being villains, they're our heroes of the economy. Absolutely.
Look talk to me about the recovery in China because
you know, well I've got a guy over there, you
know him, Hunter McGregor. He says, they're a domestic economy
is really still struggling. Why are we seeing this resurgence
in demand from China?

Speaker 2 (02:14):
Yeah, well, I mean, you know, when you look at
the macro numbers out of China, it is struggling a
bit from certainly where it's come from, but you know,
at a lot of that's driven by things that had
nothing to do with us. When it comes to food,
you know, you've got to get a real estate sector
that's not going so well. But you know, people need food,
they need good food. The domestic market and ends of
milk supplies come off. So we do have a perfect

(02:34):
storm there on the back of a couple of rough years,
I might say, So, I know, great to see them
back in the market, and so yeah, we'll take.

Speaker 1 (02:42):
That, myles, Hurrah. While this is brilliant news, is there
a danger with such a high milk price relatively I'm
talking about here, that world production will ramp up to
try and cash in.

Speaker 2 (02:54):
Well historically we've seen that, but you know, you've got
a couple of fundamental things that are happening in both
North America and Europe at the moment which are constraining
that supply a little bit. So you know, we're not
seeing the tap turned on in those markets. And New
Zealand's got its own issues when it comes to the
environmental side, where's no milk growth potentially coming. It's all
about on farm efficiency, So you know, the TAP's not

(03:16):
on when it comes to supply, despite as you say,
high milk price and what we experienced recently. So that said,
you know, we watched closely. There are certain parts of
the of the world. You know, the parts of the
US can ramp up quite quickly if the economic show.
You've got Latin America which can turn on relatively quickly
as well, So we need to watch closely. Heins. The
reason we've still got a fifty cent spread either side

(03:36):
of that ten dollars because still relatively in the year
and while we're confident, we just need to watch those
things pretty closely.

Speaker 1 (03:43):
What about ramping up domestic production here, the government wants
to double export earnings in the next decade, dairy is
the biggest act in town. It's going to have to
do some heavy lifting. I think it was Cameron Bagri
who floated the idea of more dairy conversions. Is that
feasible environmentally?

Speaker 2 (04:00):
Well, well, I think it is. Actually when you look
at the significant conversions that took place late the first
decade of the two thousand and twenty ten to fifteen
odd years, you know, we've learned a lot. And so yeah,
there are probably some conversions that we look back on
now and say, hey, we might do them slightly different.
So we've learned a lot, and I believe there is

(04:20):
an opportunity when you look at if we're going to
fulfill the promises that the Prime Minister and his team
have made around Dublin exports. You know it's not going
to come respectfully by it by some of these new
industries that are going well but off a pretty low base.
You've got to back your winners, as they say, and
so I think there is an opportunity and something that
we should be leaning into.

Speaker 1 (04:39):
Okay, the other part of the equation and your press
release this morning, was your business performance, for instance, your
dividend or your forecast earnings for the financial year twenty
five remain unchanged at forty to sixty cents per share.
And I don't want to downplay the importance of the dividend,
but when you're getting ten dollars for the milk price,
that is the key number.

Speaker 2 (05:00):
It is. And you know, we've always known the vast
majority of on farm profit or losses the case may be,
you know, comes by way of milk price. So you
know that that's that's why we're here. We're an extent
to me a farm and farms. We're cooperative, we're proud
of that, and so you know, a key focus on
that milk price. But at the same time, you know
they've got they've got a heak of a lot of
cash invested in the cop and they want to return
on that investment. So we can't keep her take her

(05:20):
off the ball. You know, high milk price puts a
little bit more pressure on us in that regard, but
you know that that's what keeps us on us and
keeps our feet to the fire as management. So we'll
continue to do that.

Speaker 1 (05:29):
Miles Harald, A great day for Fonterra and for the
New Zealand Airy industry and for the New Zealand economy.
And thank you for being a part of the Miles
High Club.

Speaker 2 (05:40):
Good Jamie, thanks so right, see you later up