Sunday, July 3, 2022

Hub offers big possibilities

Recent developments with organic milk processing have given farmers throughout the North Island some welcome news. In late 2011 suppliers to Fonterra were hit with news the cooperative was to shrink its supply catchment to the Waikato-Bay of Plenty, focussing processing on its Hautapu plant and dropping its supply base from 120 to 90 farmers. Meantime suppliers within that catchment whose three-year contracts were coming to an end also faced uncertainty over whether they would also be renewed. But in mid-February Fonterra offered contracts to the 20 Waikato and Bay of Plenty suppliers whose contracts were due to expire at the end of this season. Uncertainty had been fuelled by the late-January renewal date passing with no indication of contracts being offered. “Farmers had been surprised and a little concerned when they had no word on organic contracts,” organic dairy advisor Bill Quinn said.

“There had been rumours about contracts not being offered in the catchment zone.”

Suppliers have until April 28 to confirm their contracts with Fonterra.

Meantime, farmers outside the zone wanting to continue farming organically and supplying milk for organic products have had news on a new proposed venture. Quinn said negotiations were well underway to develop an organic “milk hub” to supply quality raw organic milk to interested parties for processing into branded organic products.

Full details of the arrangement remain confidential until parties have signed contracts, but memorandums of understanding have been agreed on, involving farmers and processors.

Quinn confirmed 12 farmers had offered conditional agreement to supply organic milk to the milk hub operation. The arrangement is a brokerage-based model, with the hub arranging the supply and delivery of fresh organic milk, rather than processing itself.

At present the proposal only relates to organic farmers in the Taranaki and Manawatu regions.  Between them the regions account for 2.4 million kg milksolids (MS) from 24 farms.

Milk transport is to be provided by Dairy Fresh, the company tasked with hauling milk for Open Country’s Wanganui plant and Miraka, north of Taupo.

Quinn said an assortment of supply arrangements are being formulated with processors seeking “job lot” quantities of organic milk for production runs.

Other processors including a cheesemaker require regular weekly deliveries of organic raw milk for their operations and would also be catered for. The appeal of the organic milk hub supply for processors was it bought the volume source to them, without them requiring to commit to farmers and processing plant continuously.

“We want to be in a position where the company that needs large volumes regularly can be sold to at one rate, while the smaller one-off operator can also buy, but at a different rate,” he said.

There was also the possibility of the milk hub “brand” sitting behind consumer branded organic dairy products, acting as a quality confirmation for consumers.

“This is getting companies excited. They can see the benefits in things like shared marketing exposure, with links through to different products they don’t make offered by other companies also supplied with the milk.”

While coy on what processors are in discussions, Quinn confirmed the new 500kg/hour spray dryer at the Waikato Innovation Park run by New Zealand Food Innovation Waikato would be one processing facility used for high value organic powder products. With the reduction in catchment, the Fonterra product range has also been re-focussed to concentrate primarily on organic cheese for the Australian and Asian markets.

The reduction came after the cooperative claimed the global market for organics had shrunk after 2008. However indications are the sector remains strong, with latest data from Transparency Market Research (TMR) indicating the global market continues to show a growth rate of 9%/year.

The United States remains the largest regional market, accounting for half of global sales. However the research company points to 20%/year growth rate expected out of Asia from now to 2017.

South Korea in particular is showing strong growth as consumers focus on healthy eating and seek benefits from organic yoghurt and cheeses.

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