Tuesday, July 5, 2022

Dairy companies to lose Fonterra milk

The second-level dairy companies which have their own farm suppliers, Open Country Dairy, Westland, Synlait and Tatua, will be weaned off additional Fonterra milk.

Primary Industries Minister David Carter has announced that from June 1 next year their access to Fonterra milk will progressively reduce to zero over three years.

However, the largest domestic dairy market competitor, Goodman Fielder, will retain its 250 million litres a season access (about 1.5% of Fonterra’s total collection), because it does not have farm supply.

Similarly, a number of smaller processors, like Cadbury, Natural Dairy and Kaimai Cheese, will continue to have access.

These smaller companies can also opt for a quarterly fixed price for Fonterra milk, rather than face the “wash-up price” system at the end of the season which had delivered some financial shocks in the past.

In addition all independent processors wanting to take up to the limit of 50 million litres annually will now be required to take milk to the seasonal supply curve.

The government has also retained the “October rule” which requires milk to be taken at the peak of the season, and not only during the shoulder periods when milk is more valuable.

With more than 1200 of their own supply farms collectively, the second-level processors have been topping up with 50 million litres a season each from Fonterra.

This considerably improves the utilisation of their plants and, in the case of the majority foreign-owned Open Country and Synlait, meant Fonterra faced competition in export markets from its own milk.

They have been living on borrowed time for the past two years the Raw Milk Regulations have been under review, because the Dairy Industry Restructuring Act 2001 which set up Fonterra’s dominant market position was scheduled for review after a decade.

Westland Milk Products, with about 400 West Coast and Canterbury supply farms in its co-operative, acknowledged that access to Fonterra milk wasn’t morally defensible, but if the regulations allowed it would continue to do so.

Tatua co-operative chief executive Paul McGilvary said he is confident that further value-added returns on its own supply would counter the loss of Fonterra milk, although Tatua had wanted a longer weaning period.

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