Rt Hon Winston Peters
New Zealand First Leader
Member of Parliament for Northland
7 APRIL 2017

North Canterbury Federated Farmers AGM
Cheviot Trust Hotel, Cheviot
April 7, 2017.
2pm-3pm

Farmers – you are lions led by donkeys

Farmers are a resilient lot.
There can be no doubt about that.
You have had to be.
You have had droughts, earthquakes.
No doubt you have too many problems that come from beyond the farmgate: for example, issues with the Reserve Bank and the overvalued New Zealand dollar.
And since yesterday with the RMA legislation based on racial privilege – every time you go for a planning consent you will not only have to get the agreement of local government, you will have to get the agreement of the local iwi.
Your resolve and determination have been challenged – almost to breaking point.
But you have endured and got on with it – in the way the farming community does.
Driving here today we travelled through Amberley and we passed that magnificent statue outside the Hurunui District Council offices of Charles Upham VC and Bar.
Like you he was a farmer from these parts.
Looking at that statue some famous words came to mind, not from Charlie Upham’s war.
But from World War 1.
Those words were:
"Lions led by donkeys."
This was an expression used to describe the British infantry of World War I.
They were the lions.
You know who the donkeys were - the generals who led those soldiers.
We have the same thing here in New Zealand with our farming community.
You are the lions.
You do all the hard work, battling the elements, the never ending turbulence of international markets – you contribute massively to the wealth of this country.
And you are being led by donkeys.
Worse than that – you are also being led up the garden path.
And the hard thing to understand is – you keep voting for these donkeys, time and time again.

RED MEAT
Our red meat industry is in crisis whether commentators realise it or not.
This road is being led along the road of foreign ownership and the main highway leads to China.
Did you not think it was strangely coincidental that shortly after Shanghai Maling obtained a controlling interest in Silver Fern Farms that the chilled lamb market miraculously opened up in China?
There might be a honeymoon period – but that soon quickly goes and the harsh reality sets in.
There is no “co-operative-private model” anywhere in the world that has worked.
Co-operative ownership, that is the New Zealand ownership component of this equation is going to be corroded.
To this growing Chinese ownership add Oamaru Meats, Prime Range Meats, Taranaki Abattoir, and Blue Sky is on the international sale market as well.
Can you see an emerging picture here?
We have a key export resource, red meat, with all its added value potential, rapidly passing into foreign ownership.

DAIRY
The dairy industry is another classic example of a disaster happening.
Some years ago, even before the Fonterra Botulism scandal of 2008 New Zealand First learned the Chinese had worked out New Zealand politicians.
They worked out New Zealand politicians would not twig to their long term game plan.
People often why New Zealand First opposed the China FTA in 2008 – the answer is because we respect the Chinese, particularly their intelligence and long-range planning.
It was not difficult to foresee in a growingly resource hungry world what the Chinese would do.
We said this was a bad deal for us.
We remember the cacophony of criticism that came our way by the cheerleaders of globalism.
These are the same cheerleaders who have no idea of what is going on in our dairy and meat industries but are so arrogant they argue that export volumes from NZ are our exports, when it must be plain to any dairy or meat and fibre farmer that they are NOT – that these exports are China exporting from New Zealand to itself.
Do you remember Fonterra’s subsidiary Sanlu back in March 2008 and the melamine poisoning that killed four children and left thousands critically ill?
That situation was the beginning of the end about much of our ownership of two key prime industries.
Then to make matters worse, there was the Fonterra Botulism scandal in August 2013.
Later that month Fonterra claimed it was a false alarm.
Fonterra’s PR spin fell on deaf ears and no Chinese newspaper and media reported it.
The damage was already done.
And China – excuse the pun - milked the situation for all it was worth.
It was worth billions to them.
And billions of LOST future revenues for New Zealand.
Their gain was our loss.
What is the significance of this?
Well, in the space of less than six years, under John Key and Bill English, China got total control of our Infant Formula industry – the biggest potential export earner that we have ever had.
Fonterra’s response was a Slow Boat to China.
Remember, China brought in new regulations and rules that caused mass confusion.
While the confusion tested the minds of MPI and MFAT and NZT&E, China had a plan.
This was: Control the source and lines of supply.
Under the guise of hygiene and quality they came to control our Infant Formula processing plants.
One party made countless statements against letting this happen.
Most of the media refused to report them.
China realised its own internal manufacturing capabilities were lacking:
- Their farms and technology were not efficient.
- Their herds were inferior and milk production per hectare was poor.
- And the quality of their milk was very poor as well.

Chinese consumers did not trust locally manufactured brands of Infant Formula for their 20 million new born babies each year.
These consumers were looking outside China – to New Zealand.
The Labour government signed up to the first free trade agreement that China had signed with any developed country.
Soon after Australia signed a better FTA with China.
And now we are trying to renegotiate ours when the horse, to use a farming expression, has well and truly bolted.
China obtained the back-door key to New Zealand’s added value dairy products.
They set up their own dairy facilities in New Zealand.
They own, operate and control the supply chain – from New Zealand, all the way to the baby’s mouth.
A Chinese business friend said the Chinese would import their own inferior milk powder from China, mix it with New Zealand’s premier dairy powder and claim that it was made in New Zealand.
He was right – that was happening.
After the Fonterra Botulism scandal, NZ Infant Formula’s reputation took a hit.
This allowed Infant Formula makers in Europe to steal much of New Zealand’s market share while the National government was boycotting Russia.
History now shows, that the New Zealand government and officials badly managed the crisis.
Their ability to protect New Zealand’s reputation, the New Zealand brand, was woeful.
After the Fonterra Botulism crisis, over 90 percent of the small New Zealand owned and operated Infant Formula businesses went to the wall.
China is now in charge.

CHINA CREATES RULES

They created the rules and issued new regulations on a regular basis.
Even MPI couldn’t translate them to help the small innovative New Zealand businesses who got sucked into this maelstrom of chaos.
Small innovative Kiwi businesses became the collateral damage to the Fonterra fiasco.
At the time John Key, then Prime Minister, was being photo-shopped into advertisements and posters – holding a can of Australian Infant Formula.
Now this company is operating in New Zealand with their brand from Australia called Cowala.
On April 15, 2016, the present Prime Minister attended the manufacturing facility of GMP Dairy Limited which is 51 percent owned by a Chinese property company called Evergrand Dairy.
Mr English was seen unwittingly endorsing the same company’s product.
This Chinese owned company had already manipulated our then Prime Minister John Key into a fake advertising endorsement.
A headline on the front page of the NZ Herald (September 2, 2012) read:

Baby Food Fraud
20 Chinese firms caught lying about their Infant Formula being kiwi-made.

SYNLAIT

Besides Evergrand, we have Synlait - a South Island company that many New Zealanders think is New Zealand owned.
They’re wrong.
Bright Dairy China’s third largest dairy company by volume, got control of Synlait back in 2010.
It owns 210 farms in China and sources milk from another 500.
It owns over 20 processing factories.
Synlait’s Infant Formula goes to China.

YASHILI

Then in January 2013 Yashili International Holdings, a Chinese Infant Formula company, announced plans to build a processing plant in New Zealand, its first major offshore investment.
In August 2013 China’s largest producer of liquid milk products, the Mengniu Group Yashili acquired a controlling interest in Yashili and Danone, a French company having a minority interest.
Why is Danone important?
This is the same company suing Fonterra for the Botulism fiasco where they lost $597 million of sales because of the scare.
Yashili entered NZ and built a plant at Pokeno with a production capacity of 52,000MT (metric tons) of premium quality Infant Formula product.
They don’t sell any of it to New Zealand consumers.

YILI/OCEANIA DAIRY
Then we have Yili, China’s largest dairy company which commissioned a $236 million milk processing plant just north of the Waitaki River in 2014 and called it Oceania Dairy.
They have announced a $400 million expansion to include an Infant Formula canning line.

CHINA ANIMAL HUSBANDRY GROUP
Next, we have China Animal Husbandry Group.
Last year this Chinese company bought a 71.8 percent stake in Mataura Valley Milk.
They are building a new plant which will manufacture Infant Formula, ultra-high temperature (UHT) cream and a small amount of skim milk powder.
About 50 per cent of what the plant produces will be going to China.
China Animal Husbandry Group (CAHB) president and Mataura Valley Milk Chairman Xue Tingwu said the Infant Formula market was expected to increase by 80 per cent during the next 10 years.
And guess who is going to get the added value of our milk on that one?

FONTERRA
Which brings us to Fonterra, New Zealand’s biggest company.
And the question - too big to fail, or is it?
When Fonterra paid $755 million for a stake in Beingmate, allegedly one of the leading Infant Formula manufacturers in China, the NBR reported Fonterra saying:
“It was confident, it was good value.”
Fonterra’s track record with international business decisions is not a good one.
Fonterra’s relationship with Beingmate has been the subject of PR camouflage.
Beingmate has suffered two consecutive years of revenue decline.
Fonterra has signed an exclusive deal, making Beingmate Fonterra’s exclusive Anmum distributor in China.
Market sources say Anmum would be lucky if it sold 15,000MT (metric tons) of Anmum in China in 2016.
And what is the value of Fonterra’s investment in Beingmate today?
$523.3 million, or a bath or haircut of over $231 million in just two years.
And Beingmate’s performance selling Fonterra’s Anmum product is appalling because Synlait with China’s Bright Dairy as shareholder, is now NZ’s largest manufacturer of finished Infant Formula.
Synlait accounts for 30 percent of NZ’s total export volume of Infant Formula in 2016.
So to give a summary:
In six years Fonterra has gone from –
- NZ’s largest company, the world’s biggest exporter of dairy powder
- A company with all the resources to manufacture a world class Infant Formula, the greatest export product we had.
- A company that could add value, and add incremental revenue to their farmers’ base dairy powder by making the world’s premium, safe and trusted Infant Formula brand.
- A company that could have helped smaller NZ companies dominate the China market.

From this to a company that just went on missing the boat!
In fact last year one of its leading lights “it’s time we got into some added value.”
Hallelujah!
The horse is out of the stable and down in the next county and they are waking up.
New Zealand First supports free trade.
But only when it is free trade when it works for us.
We say handing over dominating control to Beijing or anywhere else overseas, is economic madness.
New Zealand First was the first to predict Brexit and the need for a New Zealand-Uk Free Trade Agreement.
We said that six months before the referendum to British newspapers.
We were the first to call for a CER style Closer Commonwealth Economic Relations starting with NZ, Australia, the UK and Singapore.
We have also backed a NZ-Russia FTA – since Russia is the world’s number two dairy and beef importer.
We believe in economic nationalism and supporting our farmers.
But we do not believe in handling over our wealth, our assets, our resources to foreigners.
And what’s bright about bright.
Well, Bright Dairy controls Synlait. And Bright Food has got control of Silver Ferns Farms.
Anyone joining the dots here now?

CONCLUSION

It is now plainly obvious that consecutive ministers have failed New Zealand, failed our farmers and failed small innovative businesses.
They have allowed, under the back door key policy, several large Chinese companies to enter New Zealand by stealth.
The Chinese are taking the cream out of New Zealand.
New Zealanders are becoming the workers – serfs in our own country.
Fonterra had a head start on any NZ Infant Formula exporter to China.
It squandered that lead.
They are well back in the pack now, if not last.
According to market intelligence reports, Beingmate and Fonterra have also not engaged with the ever-changing world of e-commerce or digital marketing in China.
Unbelievable!
This is New Zealand’s biggest company abdicating its responsibility while it destroyed several innovative, small, entrepreneurial NZ companies trying to enter the China market on the back of our free trade agreement.
You know why it’s called Free Trade?
Free for me, none for Kiwi.
What was that mentioned at the start of this speech?
Lions led by donkeys.
So why would you keep voting for them?

ENDS

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