What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
With the forecast milk price falling, soaring interest rates and higher than normal input costs, farmers are in no mood right now to face scope three emissions target, first flagged by Fonterra at its last annual meeting in November.
The scope three targets relates to emissions behind the farmgate. Fonterra is under increasing pressure from major customers like Nestlé to improve its scope three emissions profile.
The co-operative had initially planned to release its scope three target in June.
Fonterra Co-operative Council chair John Stevenson told Dairy News that a scope three emissions target is not something on the minds of shareholders right now.
Stevenson says things are tough on farm right now, from weather through to the current financial situation.
"Many of our farmers are still flat out calving so a scope three emissions target and what it may mean for them is far from their minds," he says.
Asked if the time is right for Fonterra to introduce scope three target, Stevenson says it depends on what farmers will be required to do.
"Council has no visibility of when the target will be released, and what will be required on farm.
"Council will be in a position to comment further once we have more clarity."
Federated Farmers dairy section chair Richard McIntyre wants the co-op to make things easy for farmers.
"I'm not going to tell Fonterra how to run their business - they're much close to the customer than I am and at the end of the day, they need to be able to make business decisions based on the information they have in front of them," he told Dairy News.
"But what I will say as a Fonterra supplier is that if they are going to be putting new requirements or costs on farmers, they better be bloody sure they really are necessary.
"There's a lot of pressure out there at the moment, and some farmers are really hurting, so thye need to make things as easy and cost effective as they can for farmers."
Fonterra has warned that if farmers fail to address scope three emissions, major customers could look elsewhere for products and even switch to plant-based dairy.
Stevenson points out that decisions around scope three sit squarely with the board and management.
"We have conveyed to the board the current tough situation on-farm now, and are here to represent the views of our farmers.
"Once we have an idea of the on-farm inpact of any scope three announcement, we will be able to comment further."
