The Country 19/02/25: Andrew Murray talks to Jamie Mackay

Fonterra's Chief Financial Officer comments on the co-op's low emissions payment incentives announced yesterday and last night's GDT auction.

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Episode Transcript

Speaker 1 (00:00):
Continuing on from Emma Higgins. Yes, the good news story
the global Dairy Trade auction. I want to get the
take of Andrew Murray. Fonterra is new or relatively new CFO. Andrew,
we haven't chatted before, because if we had, I would
remember that wonderful Scottish lelch you've got. How long you've
been in New Zealand for Oh?

Speaker 2 (00:17):
Thanks, Jemy, I both. It must be just over six
months in the country. No, yeah, so finding my feet finally,
I think now.

Speaker 1 (00:23):
I wanted to talk about Fonterra's incentives for lower mission's milk,
and I realized this is not quite in your wheelhouse.
But I just want to ask you before we get
some GDT commentary from you. Is this, as one farmer
said to me on yesterday show, is this a bit
of greenwashing from the likes of Mars and Nesle.

Speaker 2 (00:44):
Oh, look, I think I mean greenwashing is a very
serious word to throw our own. I think to be
very specific, I mean these are commercial agreements and we
have very specific, separate contracts with these customers to pervade
them with the Lewis carbon milk. So this is very specific,
it is separate, it's not just buying any bag of

(01:04):
milk poder. It is a separate contract. It actually creates
extra value. So this is additional value that we wouldn't
be getting otherwise to provide valves and nestlie with the
lowest carbon milk. So it's absolutely a solid commercial agreement.

Speaker 1 (01:19):
Okay, is this the beginning of a bigger picture here,
because we're looking you know, like the one to five
cents per kilogram as less than half a percent on
a ten dollar payout, and half your farmers are going
to qualify for that, but only about three hundred of
your farmers suppliers will qualify for the ten to twenty
five cents. That's only like three percent of your farms.

(01:43):
So this is very small scale, small beginnings. Put it
that way.

Speaker 2 (01:47):
Yeah, and I think that's the key part, right, this
is about giving the lowest carbon milk, and so obviously
then it is a smaller proportion, but this is important
if you look at our strategy, you know, sustainable is
a key part of the strategy for us going forward,
and these strategic customer relationships are incredibly valuable. So this
is extra value that's created on top of you know,

(02:08):
milk price and earnings. This is extra value that comes through,
and so as we continue to develop those relationships with customers,
we would expect that we would you know, can we
do more of this? I would hope we can.

Speaker 1 (02:20):
Now I'd love to ask you which sort of farmers
would qualify, but I realized that you're that you're the CFO.
This is not on your whalehouse. It's a conversation perhaps
with Miles Harrell. Look, I want to move on to
the GDT auction down zero point six percent, better than
the futures market was predicting. Andrew, I put it to you,
this was a good result.

Speaker 2 (02:39):
Yeah, I think we're quite comfortable with actually with how
the result came through. You know, good, good demands still
coming through. We saw China come back after you know,
Chinese New Year period for you know, the last sort
of a couple of weeks, but really still seeing good
demand out of Southeast Asia and the Middle East as well.
So yeah, I agree, I think it was a good result.
And you know, we've had good supply year. You know,

(03:01):
New Zealand supply in particular is up, even a serious
supply up as well. So we've had good supply. The
demand is holding and that's a good place for us
to be in.

Speaker 1 (03:09):
Will that supply hold though North Island's getting very dry.

Speaker 2 (03:14):
Yeah, it is a expect probably that will continue maybe
into sort of mid March, I think, is the thinking.
But we'll still be up, so, you know, certainly up
on last season, so you look at that. I think.
The other side of this, of course is that you know,
the US in Europe, you know, they're not they're not
growing too much a minute kind of flat if you
look at it from a production standpoint. China domestic production

(03:37):
is down as well, so you know, it's it's good
from the demand stive in terms of it, you know,
puts a bit of before under that price, I think.
But yeah, we may tail off a little bit I
think from here, but but ultimately it's it's up on
last year and that extra supply is good for.

Speaker 1 (03:51):
US buds well for an eleven dollar payout. Andrew, are
you going to call that first time to the betest
box on the show with me? Come on, Andrew, make
a name for you.

Speaker 2 (04:00):
I think I'm pretty sure we've got a tend on
milk price. Yeah. Look, we're pretty comfortable to arrange and
and of course you know We've got a good earnings
profile this year as well, so it's a it's a
good return from from a farmer's perspective in terms of,
you know, good milk price, stable earnings, and that's a
nice place for us to be in.

Speaker 1 (04:19):
Yeah, ten bucks will take it. Andrew Murray Pontira, CFO,
thanks for your time.

Speaker 2 (04:23):
Thanks Jemmy,