Fonterra quits Russian dairy venture to avoid Ukraine war fallout

Andrew Marshall
By Andrew Marshall
Updated March 22 2022 - 6:11am, first published March 21 2022 - 7:30pm
Ukraine flak forces Fonterra to cut Russian dairy ties

Dairy giant, Fonterra, is bowing to public pressure - including calls from its farmer shareholders - closing its Moscow office and quitting a modest joint venture in Russia.

The trans-Tasman listed co-operative has pulled the pin on its three-year-old Russian Unifood operation as a direct consequence of the Putin administration's war on its neighbour, Ukraine.

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Fonterra had already suspended shipments to Russia in late February just as an international outcry against the invasion triggered new economic and trade sanctions against Moscow.

New Zealand butter exports shipped by Fonterra and its predecessor businesses have been one of Russia's long established dairy import categories, dating back four decades.

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However, the Russian market currently only represents about one per cent of the big co-op's annual exports.

"Given the current strong demand for NZ dairy, we are confident in our ability to re-allocate this product to other markets," said chief executive officer, Miles Hurrell.

Fonterra has seven Moscow-based staff, but the Unifood venture with a St Petersburg-based distributor is understood to employ about 35.

Mr Hurrell said the company's priority following Russia's Ukraine invasion had been to establish the safety of staff in Russia.

"Following careful consideration of the impact on our people and our long-term plans for the Russian market, we will now close our office in Moscow, re-deploying staff where possible, and withdraw from Unifood," he said.

The decision follows NZ Federated Farmers president, Andrew Hoggard, calling for the company to walk away from its Russian business.

He believed the venture was now probably worthless.

"It's pretty pointless having any business in Russia because they are basically going to become a pariah state," said Mr Hoggard, also a North Island dairy farmer at Fielding, and a Fonterra shareholder.

NZ Federated Farmers president, Andrew Hoggard.

"What money we have tied up there now is probably lost. There's not much point in having either operating."

He said the Russian investment was "chicken feed" compared to the amount of money the co-operative recently lost through its investments in China.

Horsepower help

Meanwhile, the Agco Agriculture Foundation, a charity aligned with US-based farm machinery giant, Agco Corporation, has donated $US100,000 to help the United Nations World Food Program provide food assistance for families affected by the conflict inside Ukraine and neighboring countries.

The foundation noted farmers, farming communities, homes, and economies had all been badly impacted by Ukraine's ongoing crisis.

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People were fleeing their homes, families, farms, land and businesses.

"Our thoughts and prayers are with our employees, families, and the people of Ukraine during this time of crisis," said foundation chairman Roger N. Batkin.

"Watching the destruction of lives and lands due to the crisis in Ukraine is deeply troubling."

The UN World Food Program recently launched an emergency operation seeking $US570m in emergency response to provide food for civilians fleeing the Ukraine conflict.

Agco Corporation, the parent company to farm machinery brands, Massey Ferguson, Challenger, Fendt and Valtra, in partnership with the Agco foundation, also aims to donate 182,000 meals in three months as part of another "Share the meal" fundraising effort for the UN food program.

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Andrew Marshall

Andrew Marshall

National agribusiness writer

Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).

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