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Fonterra's Spierings warns resurgence of nationalism, protectionism threaten global trade

Thursday 2nd February 2017

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Fonterra Cooperative Group, the world's largest dairy exporter, says a resurgence of nationalism and increased protectionism threaten global trade.

Chief executive Theo Spierings told institutional investors at a briefing that among global trends, a "resurgence of nationalism brings uncertainty", citing Brexit, Turkey, China, Russia and the US, and also noted that "protectionism threatens global trade", according to notes from the briefing posted to the New Zealand stock exchange. 

Fonterra is the world's largest milk processor, taking in about 22 million tonnes of milk a year, and accounts for 17 percent of global dairy exports, sending its products to more than 140 countries. Growth in global trade is uncertain this year following the election US President Donald Trump, who favours protectionism and has withdrawn from the Trans-Pacific Partnership trade deal, and Britain's plan to withdraw from the European Union, dubbed Brexit.

Spierings predicted volatility in commodity prices would prevail. Global dairy prices have become increasingly volatile over recent years as government subsidies and schemes propping up prices have reduced, allowing prices for more products to be set by the market. For farmers, that's meant huge swings in prices, with Fonterra paying a record $8.40 per kilogram of milk solids in the 2013/14 season but just $3.90/kgMS for the 2015/16 season, below the level required by most dairy farmers to break even.

Still, Spierings said the dairy cooperative remains on track to meet its 2025 target to process 30 billion litres of milk from five to six milk pools, generating $35 billion in revenue as it pursues a strategy to process more higher value products.

He lamented that global productivity growth of food production had fallen below 1 percent a year, compared with between 3 to 4 percent for much of the post-war era, saying growth of between 2 to 3 percent would have an "immense" impact on combating global poverty.

Climate change was working against the future of food, with food production contributing 30 percent of global greenhouse gas emissions and serious land degradation affects 20 percent of the world's arable land, he said.

BusinessDesk.co.nz

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