Continued improvement in customer demand has led to Fonterra lifting the forecast for its organic milk price from $9.55/kg milk solids to $9.85/kg MS.
It brings the revised forecast range for organics to $9.35-$10.35/kg MS, up from $9.05-$10.05/kg MS.
That demand is from the United States and the United Kingdom, where almost 90% of Fonterra’s sales book is now contracted, Fonterra group director of Farm SourceAnne Douglas said.
“Fonterra Organics is in a strong position and, as always, we will keep monitoring any risks that could potentially impact the business.”
Fonterra has 110 organic farms throughout the North Island, Fonterra Organics business relationship manager Stuart Luxton said, speaking at a field day at Pāmu’s organic dairy farm Earnslaw, just north of Taupō.
“I refer to our programme as a small co-operative within the embrace of a much larger co-operative,” he said.
The milk is processed at Morrinsville, Hautapu and Waitoa. As a result, transport is the biggest expense.
Fonterra general manager of organics Andrew Henderson said its milk solid growth has doubled from 2020 to 2023/2024.
The products go into the market as Mainland organic cheese and butter, Kāpiti Mature Cheddar, Anchor Blue Milk and NZMP Ingredients.
These products go into 13 different countries that have different certification criteria.
While the spike in costs of living over the past few years has put downward pressure on organic sales, consumer demand for more sustainable products and health and wellness influenced by the covid pandemic has offset a lot of that pressure, he said.
“That’s why we’re still seeing growth.”
The co-op’s market development manager for organics, Anna Maginness, said the organic dairy market globally is worth US$24 billion (more than $38bn) and growing around 5% a year.
“Depending on what data source you look at, it’s expected to grow to around US$50bn by 2030.”
However, it is still minuscule compared to the global conventional dairy market, which sits at US$570bn.
“It’s still very much a niche premium offering.”
Organic dairy had a 20-50% premium over conventional dairy depending on the brand and product range, Maginness said.
Two of its biggest markets are the US and China. The former is well established with a lot of growth across butter, cheese and yogurt.
Fonterra sends a lot of its organic product into this market in the form of powders and beverages through Orgain.
It also sends ingredient products into infant formula as well as butter and cheese.
The market in China is still developing with infant formula and UHT milk being the main product categories driving this market.
In China, the milk is sold under the Anchor brand with this market experiencing huge growth over the past three years.
Fonterra’s product also goes into South Korea in the form of cheese products for children.
