MILK MONITOR
Strategy paints bold future By Gerald Piddock
Each month the milk monitor delves into the dairy industry and gives us the low-down on the good, the bad, the ugly and everything in between.
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eleased at Fonterra’s annual result, its areas of focus will be making the most of New Zealand milk, investing in dairy sustainability, innovation science and nutrition. The logic behind this is pretty simple, as covid has made consumers more conscious of the nutritional qualities of food and that means they want our grass-fed milk “Putting it simply, the world wants what we have got: sustainably produced, high-quality nutritious milk,” chief executive Miles Hurrell said at the time. The long-term protection of that milk pool has played a large influence in Fonterra’s capital restructure proposal. Fonterra chairman Peter McBride says retaining the status quo could see its milk pool decline by as much as 20% by 2030 in modelled scenarios. “Our operating environment has changed significantly. When TAF (Trading Among Farmers) was implemented, milk supply was growing rapidly, now we’re seeing more land go out of dairy than coming in,” McBride says. This likely land-use change will mean a flatter production curve as environmental regulations prevent intensification. “Our share of that decline will depend on the
Fonterra’s capital restructuring proposal is designed to retain suppliers within the co-operative, as it looks to maximise the value of its homegrown milk.
actions we take now,” he says. He went on to say modelling also forecasted a 6-13% lowering of the milk price without those changes. In a nutshell, Fonterra has proposed to allow a more flexible shareholding structure and allow more kinds of farmers to become shareholders – sharemilkers, contract milkers and lessors. While this is a response to longstanding criticism of the difficulties for young farmers to purchase Fonterra shares, it is also to help retain these farmers in the co-operative and make it less likely for them to be enticed by other milk companies. The era of large-scale dairy conversions and expansion is well and truly over. What is revealing
in the annual result presentations was there was no mention of the C word – competition. In case you hadn’t noticed, the country’s largest dairy region, Waikato, is becoming increasingly crowded. The world’s third-largest dairy company Olam confirmed its plans to set up a factory in South Waikato as it seeks a slice of the country’s grass-fed milk pool. Add to that Happy Valley Milk’s planned factory in Otorohanga, they will join Tatua, Synlait, Open Country Dairy, Fonterra, the Dairy Goat Co-operative, Maui Milk, Miraka, Spring Sheep and Yashili. Now to be fair, some of these are not actively seeking out new suppliers, but there are a lot more options out there
Fonterra chairman Peter McBride says Fonterra’s retention of their share of the milk pool has played a big part in Fonterra’s capital restructure.
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DAIRY FARMER
October 2021
