New Zealand dairy farmers seek alternatives to Fonterra

New Zealand's biggest dairy processor Fonterra is under pressure due to reports that some of their shareholders are planning to supply milk to its competitors. John Boylan reports.
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Fonterra Cooperative Group, New Zealand’s biggest dairy processor, said it is managing to hold its own in the dairy intensive Canterbury region, despite reports that some of their 10,600 shareholders are lining up to supply milk to its competitors in the wake of its weak interim results last week.
Dairy Chair of Federated Farmers, Andrew Hoggard, has cited a source from Open Country Dairy, New Zealand’s second largest processor, who said it had 100 inquiries from Fonterra shareholders in just two days last week. This is on top of the 500 it already has on a waiting list in Waikato, Taranaki and Southland regions.
Maori owned Miraka, a newcomer to the dairy scene based in central North Island, also has a number of farmers on a waiting list and says that most of its current 100 suppliers have come from the dairy giant.
Neither Open Country Dairy nor Fonterra would confirm these figures, but what is sure is that farmers are disappointed with Fonterra’s cut in dividend when the milk price is down to NZ $4.70/kg.
Farmers also feel let down by the co-op’s lack of return as well as the fact that its added value strategy is not producing better results for the investment.
Most of the dairy processors are reluctant to talk about competition for milk supply, with only Oceania Dairy, Synlait and Fonterra confirming they are actively seeking to sign up new farmer suppliers.
Percentage of national milk supply per processor
Fonterra has dropped their percentage of national milk supply from 96%, when the co-op was created 14 years ago, to 87%, even though the total quantity of milk has grown significantly from increased production and conversions.
Open Country Dairy has 4.6%, Westland 3.5% and Synlait 2.6%, which has increased by 1% in the last four years.
Tatua, which has consistently paid their suppliers the highest payout, is just below 1%, while other newcomers, Oceania Dairy and Miraka account for a further 1.44%.
Fonterra’s biggest problem is with farmers increasing supply or new farmers converting to milk. Up until now they had to raise the capital to buy shares for all milk they would supply to the co-op, which is not the case with their competitors.
‘Mymilk’ subsidiary
Fonterra has responded to the growing competitive threat by launching its ‘Mymilk’ subsidiary last September, which allows it to source milk from suppliers who are not shareholders.
This initiative has been limited to milk from Canterbury, Otago and Southland regions, where competition is most intense, but could eventually extend to the North Island. Under this scheme, suppliers get a one year contract to supply Fonterra, which can be renewed for up to five years, when they have to decide whether or not to become Fonterra shareholders.
 
Source: FarmersJournal
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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