Organic milk supply to be cut

By Mike Barrington

1 comment

Fonterra is shedding its handful of Northland organic milk suppliers as it trims costs to make its organics business more profitable.

Company officials this week told the 11 organic suppliers among the 1100 dairy farmers north of the Auckland Harbour Bridge they will not have their contracts renewed if they expire next year.

These northern farmers will then be able to continue as Fonterra suppliers, but they won't receive the organic milk premium of 45c per kilogram of milksolids paid while farms convert to organics and $1.05kgMS when certified.

Dargaville organic milk supplier Murray Farrand said Fonterra officials had told him on Tuesday his organic supply contract would be honoured until it expired in 2016, when it would not be renewed.

Mr Farrand, who milks 320 cows on 160ha, expected his premium payment to rise to $1.05 kgMS when the four-year conversion of his property was completed for organic certification on September 1. He was satisfied the firm was meeting its obligations by honouring his contract for three years.

Organic milk from throughout the North Island is used to make organic milk powder, cheese, protein and butter at Fonterra's Waitoa, Morrinsville and Hautapu sites in the Waikato and the company has reduced transport costs by concentrating organic milk supply in the central and lower North Island.

Waikato and Bay of Plenty organic milk suppliers with contracts expiring this year will have them renewed for three years and Manawatu, Taranaki and Wairarapa suppliers with contracts expiring this year will have them renewed for two years.

Fonterra Nutrition managing director Sarah Kennedy said 36 North Island organic farmers were getting their contracts renewed this year, while 56 still had more than a year left on their contracts. The number of organic suppliers and the value of their product were confidential, she said.

Fonterra's organics business was unprofitable in 2011 as public appetite for premium products waned in the wake of a protracted downturn in the economy.

But Ms Kennedy said organics had been returned to profitability in the past 18 months.

"We were losing money so we restructured the business to focus on markets in Asia," she said.

Fonterra entered the organic market with its first production of New Zealand-made organically certified cheese and milk powders in 2002.

At the time it had 31 organic milk suppliers and recruited to boost numbers to about 200 to satisfy overseas markets.

- Northern Advocate

Get the news delivered straight to your inbox

Receive the day’s news, sport and entertainment in our daily email newsletter


Sort by
  • Oldest

© Copyright 2016, NZME. Publishing Limited

Assembled by: (static) on production apcf03 at 22 Oct 2016 23:22:12 Processing Time: 308ms