Saturday, December 2, 2023

OFI factory up and running in Tokoroa

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LPG stopgap after covid delays plans for biomass boiler.
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After a challenging two years of construction, Olam Food Ingredients’ dairy processing plant in Tokoroa is up and running, producing whole milk powder for the export market.

The $100 million factory has largely finished commissioning and is collecting milk from its farmer suppliers in a 70km  radius.

It employs 53 people, with over 80% of the staff being local, indicative of the support received from the local community, OFI operations director Paul Rennie said.

It was the end of August when he saw the first two bags of milk powder produced from the factory.

It came with a huge sense of relief after a long process of getting the factory completed.

“We were definitely thrown some curve balls with covid, supply chain issues, border lockdowns. We certainly faced what I would call some unprecedented challenges.

“For everyone involved, from farmers all the way through to construction, it’s been a remarkable journey, and it was an absolute delight and relief when those first bags came off.”

Those two bags now sit in the company’s office in Tokoroa town centre as a reminder to mark the occasion.

From there, over the past two months staff have focused on further fine-tuning the factory to hit its performance targets as it comes into the peak milk period, he said.

The factory is making whole milk powder via a spray dryer that is powered by LPG. OFI had originally planned to run the factory via a biomass boiler, but this became a casualty of covid supply chain disruptions, Rennie said.

“We had to pivot rather late in the piece to go with LPG.”

The concrete foundation of where the boiler will sit has being built and the machinery parts have arrived and are sitting alongside the factory.

It will now be assembled this season with the aim of having it in place and operating for the start of the 2024-2025 season. The LPG system will remain onsite as a backup.

The boiler will run on “hog fuel”, which is a form of residue forest timber converted to woodchip and OFI has partnered with local forestry companies to ensure surety of supply.

Producing WMP represents the first phase of OFI’s investment in New Zealand. In the second phase it will expand its plant to add the means to produce specialist protein powders.

“WMP will certainly be part of the mix, but phase two and beyond is about value-added ingredients,” Rennie said.

That second phase is still at least two years. Any premiums generated from those added-value products will be delivered to farmers.

The WMP is packaged by robots and stored, ready for shipping, in a warehouse adjacent to the factory.

Rather than spraying the factory’s wastewater onto farmland, OFI has managed to secure a consent to dispose of its water through the local sewer network.

For now, the powder is being exported to North Africa as OFI goes through the time-consuming process of getting regulatory approval from the central government for market access.

The company has also been able to recruit enough farmers to form a base to supply the factory. OFI milk supply general manager Paul Johnson said he is proud of the quality of farmers who are supplying the factory.

“They took a risk backing OFI to come and join our business and it’s working – the partnership is really strong, and we are getting good engagement from our suppliers.”

That partnership is based on face-to-face interaction where the OFI senior leadership team know each farmer. The suppliers are also given the opportunity to personalise their supply sign that sits on the farm entrance, which is a recognition of the partnership they enter with their farmers, Johnson said.

“It’s not about being a number, it’s about being a partner.

“We want to be welcoming to our farmers, know their business and understand their challenges.”

OFI pays its farmers a guaranteed base milk price and then pays incentives around animal health, milk quality and regulatory data. That base price is currently $7.25/kg MS, paying farmers an advanced rate of $6.15/kg MS.

“We have an opening advance rate and then we have uplifts within the season that release those cash incentives as achieved.

“These uplifts occur three times throughout the season. It’s all about positive cash flow,” he said.

The base milk price is also reviewed during those uplifts and they also use a fixed milk price option for suppliers of up to 50% of their production.

While the exact number of suppliers is confidential, Johnson said they are comfortable that the number they have is both a good starting platform and provides them with enough confidence to invest further.

The factory officially opens on November 16.

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