Fonterra’s five biggest challenges: Part V – “Dirty Dairying”

When the Dairy Board, Kiwi Dairies and New Zealand Dairies all merged into super entity Fonterra, you might as well have painted a giant target circle on its forehead for all the eco-activists to throw darts at.

There is no question that the New Zealand dairy industry has a grotty environmental past. And as it intensified its production, consolidated its holdings and expanded its influence, the side effects grew worse.

New Zealand still has problems with effluent running into rivers and streams, as well as nitrogen from fertilisers and other farming waste products.

How bad is the damage and has Fonterra done enough to reduce these environmental effects and preserve New Zealand’s green image?

Clean stream dream

In 2003 Fonterra announced the Dairying and Clean Streams Accord, an agreement it signed with the Ministry for the Environment, Ministry of Agriculture and Forestry and the regional councils.

The accord was basically designed to pre-empt industry regulation following Fish and Game New Zealand’s Dirty Dairying campaign of the early 2000s.

The campaign brought public awareness to the side effects of dairy farming through powerful imagery that highlighted water pollution of lakes, rivers and streams.

Fonterra’s response to help resolve the situation were five standards:
-    cattle must be excluded from 90% of streams, rivers and lakes by 2012;
-    90% of regular crossing points must have bridges or culverts by 2012;
-    100% of farm dairy effluent discharges to comply with resource consents and  regional plans immediately;
-    100% of dairy farms to  manage nutrient inputs and outputs by 2007; and
-    90% of regionally significant wetlands to be fenced by 2007

Although Fonterra has done well to ensure most of these targets are on the way to being met, the most important and most visible, effluent discharge, hasn’t improved significantly since the scheme was introduced.

Yesterday the Ministry of Agriculture and Forests released its yearly “snapshot” of how the scheme is performing.

Overall, the level of full compliance with effluent discharge requirements across the 2007/2008 year was 70%, slightly higher than last season’s 68% but still nowhere near 100%.

The level of significant non-compliance – willful or negligent discharge of a serious nature – recorded in 2007/08 was 11%, slightly lower than 2006/07’s result of 12%.

MAF stated simply:  “This is an unacceptable result given that full compliance is a regulatory requirement [of the Resource Management Act].”

Hitting affluence as well as effluence?
Fonterra’s newest move, the Effluent Improvement System, is designed to get that significant non-compliance figure halved by 2011 and involves both the carrot and the stick.

Even this has drawn heat as condoning illegal activity.

The announcement of changes to the scheme was obviously designed to pre-empt yesterday’s announcement.

The plan will see Fonterra impose deductions on farmers not reaching the compliance targets in their plan through a two-tier system: a deduction of $1,500 being incurred for council infringement notices, and $3,000 for prosecutions.

For most of Fonterra’s suppliers $3000 is insignificant, especially when compared to court fines.

Whether or not the problem is actually Fonterra’s cross to bear is another question – they don’t supply the milk, they buy it.

The problem here for Fonterra is redemptions.

If it pushes too hard, it can lose suppliers and industry support for exceeding its mandate; but if it's too soft it looks like it's condoning the behaviour and will end up with industry regulation down the road.

Where’s the sheriff?
Ian Balme of Environment Waikato believes that Fonterra’s EIS is simply an attempt to piggyback on the work of regional councils, which are still required to do all the work.

He wants the Environment Court fines to be boosted to $300,000 for recidivist individuals and $600,000 for repeat offending corporate farmers.

Certain breaches of the Resource Management Act 1991, including discharging contaminants into water without a consent, can already be punished with a maximum two-year prison sentence or a fine of up to $200,000.

The old-fashioned “my land, my law” mentality among some of the farming dynasties has mostly died off in the modern era but there are a few cowboys who either deliberately flaunt laws or simply run with the fines as a cost of business.

It is worth remembering that for some of these bigger operations, the clean streams accord and various stretches of the consent process with local bodies are extremely expensive when compared to fines – most of which max out at around $30,000.

Agricultural minister David Carter, Fonterra, Federated Farmers have all kept the message simple – those who flaunt the law have to be prepared to deal with the consequences.

There are, however, several prominent cases of repeat offenders who have almost become celebrities for their alleged environment ambivalence.

For example, Allan Crafar of CraFarm Group, the biggest private family dairy farming business in New Zealand, has been labelled the “poster boy for dirty dairying” by many in the industry, including Mr Balme.

Mr Crafar is no stranger to the courtroom, and sent his lawyers after NBR before this article was even written – obviously pre-empting his presence in the story.

That should say enough about his standing in the community by itself.

Whether Fonterra should continue to accept supply from serious repeat infringers remains a bone of contention.

Fonterra can rightly claim it’s not its place to prosecute violators, when measures exist within the law as a function of government.

A nation of greenies
New Zealanders have long had a firm belief in a clean, green New Zealand.

It is our cultural image, our image projected abroad and gradually our commercial image.

The nuke-free 1980s and the Rainbow Warrior bombing aligned us green culturally, and the environmentally progressive Resource Management Act commercially and industrially, no matter where citizens sit on the political spectrum.

Fonterra has long been guilty of a lack of clear communication, but the hiding it has allowed itself to take on its environmental record in the public arena is absurd.

The Greens and other critics have easily painted the dairy industry as evil corporate masters controlling the country politically and financially, laying waste to the land and pushing genetic modification, cancer-causing milk and methane burps of doom on the population.

Fonterra has allowed itself to be painted as such.

Most New Zealanders realise the dairy industry is the nation’s lifeblood, and don’t believe that being green and doing business are mutually exclusive.

The industry has been watching the green movement gather steam for 20 years – but didn’t do anything until pushed, and even now looks reactionary and ill prepared.

The fact that Fonterra is making any kind of effort at all shows a vague sense of industry responsibility, but realistically, after all these years the remaining serious effluent offenders are either incompetent as farmers, financially unable to comply, trying to prove a point or quite simply crooks.

Does Fonterra really want to be associated with any of these groups?

Part I: Collective capital
Part II: Finding solutions to those balance sheet blues
Part III: Queen Street farmers and corporate accountability
Part IV: Global Stagnation

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12 Comments & Questions

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I have long been of the opinion that one reason many dairy farms have made so much money is that the true cost of dairying is not being paid by those farms. The true cost needs to account for the appropriate (and legal) disposal of effluent. Whether the laws around this area are good, bad or indifferent is immaterial. If they are good, abide by them; if they are bad, seek to change them; if they are indifferent, live with them. But in all cases, the law must be respected. The alternative is anarchy. What if 20 people driving to work in Auckland today thought that the "drive on the left hand side of the road" law was a bad law? Just those 20 people would wreak havoc, until the authorities took them off the road. So, why not dirty dairy farms. It is not Fonterra's role to be the policeman, but surely they have a responsibility here - buying milk from dirty farmers abdicates this responsibility. And the authorities need to step up to the mark, or be accused of washing their hands in the very effluent that they have been charged with controlling. You are at risk of making Pontuis Pilate look good!

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Non-Hodgkins Lymphomas are on the rise world wide and one of the leading causes - fertiliser running off farms into drinking water.

It's not only bad for us but it's bad business for the farmers. Put up a fence, keep your cows out of the streams - it's better for the cows and better for their milk output. It's not rocket science - stop being lazy.

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"Most New Zealanders realise the dairy industry is the nation’s lifeblood"

Well, that's debatable. Some would say tourism is a larger export earner, and employs far more people than the dairy sector. The agricultural sector is obviously important, but agriculture does not equal diary exclusively. Some would go as far as to say that clean water is the lifeblood of a nation.

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Its all very well for the Greens to rave on about keeping the water clean, protecting our image and such. All well meant no doubt. But I do not see that it is Fonterra's responsibility to force the farmers to come to the party.
When we take petrol from a service station, it is not our job to ensure the supplier is complying with run-off rules, is it?
The faults lie in other areas. The RMA has alienated much of the farming community with blid, stupid compliance requirements. Signs on all farm access gates warning of Hazmat issues for example. When in fact if someone wanders uninvited onto a farm, goes into his shed, eats some chemical, that person is totally responsible for the consequences. But if the farmer does not have all the right signs up, he will be prosecuted!
This is a factor in some farmers resisting, plus the very real costs in fencing off wetland areas.
Pretty much all farmers have measures to deal with cowshed run off and this was the biggest pollution source.
It is for the Local Autority to be the Policeman, not Fonterra in my view. Fonterra is acting as a good community citizen by adding their own "encouragement" to the farmers. But their primary concern has to be to monitor cleanliness in the cowshed, ensure we get clean and safe milk. Not worry about if the cows can walk into the creek at the bottom of the farm.

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I am shocked we are still debating this.

The fines should be raised and compliance enforced. The wilful flouting of this law is significant moral, environmental and a legal issue and should not be condoned by anyone.

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The latter, I think.

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MMmmm, pour me another warm mug of delicious melamine! PROTEIN!!!!

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It would be nice Hugh to see some reporting of the increasing costs of complience with Regional Councils rules on effluent disposal. Once a single effluent pond was enough, then two pond systems were required, then three, then land based disposal becomes the standard, then the area required for land based irrigation is increased, soon every farmer will be required to have storage for 3 months of effluent to be diposed of on the land and every previous model of disposal will be non-complient.
Effluent disposal systems would cost farmers by my estimate Hundeds of Millions of dollars per year.
While those in ivory towers moralise and point fingers in an extremly unattractive way, many of them pouring their own untreated waste into the Nation's rivers and beaches every time it rains, dairy farmers have to figure out a way to pay for the latest requirements and still service their overdraft.

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Sorry that last post should have been addressed to Allen not "Hugh"
BTW; to those talking about the outrageous money dairy farmers make read http://www.stuff.co.nz/business/industries/2200486/Record-pay-cut-hits-d..., I guess $5:60 an hour is great money for a business owner, in Sudan or Zimbabwe anyway.

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hahahahahaha

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i agree with steve tasker lol ...

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emmy; i love milk

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