When farmers hear the words market activity and regulation, understandably, most just think “compliance”. The underlying reason for why we request certain behaviours or data is often lost.
The Co-op is a global dairy producer and supplier, and we operate across diverse regulatory and trading systems internationally. About 95% of our product is exported and touches on multiple jurisdictions, countries, and customers, all of which have different regulatory regimes. Added to this challenge is the increasing interest in how food is produced.
The food safety and the physical elements of the product will always be important, but consumers want to know what goes on behind the farm gate. Regulators have accordingly responded to these concerns and added new regulations.
What we’re now seeing is an alignment of food safety, animal welfare and environmental standards across countries that are feeding into trading requirements. This harmonisation has increased the standards that we’re shooting for – it’s raised the bar. This means that we need to up our game across all levels of the Co-op – from farm to manufacturing to export. When milk leaves the farm, we’re not sure where it will end up internationally or in what product, so we need to make sure that the product meets not only our food safety standards, but also international standards at every step.
Take cheese, for example, which is manufactured in New Zealand for export. In some respects, we may not know at the time of manufacturing where it’s going to go, but we need to think about whether it will meet the evolving EU animal welfare standards or US FDA food safety protocols. We don’t want to be in a situation where we’re limited in terms of the ability to access some of these key markets based on not being able to meet their expectations.
The EU is a good example of how it’s using domestic standards to determine imports. It has a clear set of standards around what farmers in the EU region must do. It was also decided that if you want to import into that region, you have to meet the same standards. Otherwise, why would you simply create a scenario whereby you can import food from a part of the world that has a lower set of standards than what you’re asking your domestic farmers to do?
Harmonisation has been progressing and happening over the years. The Codex is a really good example of harmonisation and how that regulation determines market activity. This is an international body that sets 50 standards across 180 countries.
It’s a collaborative and dynamic environment. For a dairy cooperative like Fonterra, we have to invest in people in the regions to have relationships with regulators. We have the Trade Managers in Amsterdam and Chicago, and they are constantly monitoring countries and EU and FDA regulations to try and understand not only risk, but also opportunity here for the Co-op. Often, directives will be thrown out, and we have to pivot quickly.
Now, Fonterra is incredibly well- positioned with its representation around the world and its investment in people and in the relationships, and we can manage these things, but they are fast-moving. We need to be agile and forward- looking when we think about the world’s evolving regulation and market access. It’s reshaping how we produce food and how we trade food, but also how we compete. The Co-op has the scale, we’ve got the people, we’ve got the systems to actually take a really strong leadership role in this. We shouldn’t be aiming to just comply; this is an opportunity to thrive.