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Fonterra's Spierings wary of trade threats

NZN 1/02/2017 Tina Morrison

Fonterra's boss 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.

He 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 dairy exporter, accounting for 17 per cent of global dairy exports, and it sends 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global trade is uncertain this year following the election US President Donald Trump, who favours protectionism and has withdrawn from the Trans-Pacific Partnership trade deal, and Britain's plan to withdraw from the European Union, dubbed Brexit.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 co-operative 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.

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