Fonterra doesn't have distribution centres full of product and the rising price at two recent global dairy trade auctions isn't a result of manipulation by the company, global operations managing director Robert Spurway says.
"Only 25 per cent of our sales go through the global dairy trade and we're absolutely not building inventory," Mr Spurway told the Dannevirke News in Pahiatua on Tuesday.
"We're looking to see our product through to the most valuable markets, with wholemilk powder from Pahiatua going into Venezuela, Algeria, Sri Lanka, Cuba and more than 20 other destinations."
Nationally Fonterra sells dairy product into more than 100 markets worldwide and production is beginning to ramp up at the new $231million powder dryer at Pahiatua. That is receiving 2.4 million litres of milk a day from dairy farmers along the east coast from Wairoa to Wellington, the new plant (P3) producing 15.5 tonnes of powder an hour.
"It's going well," said Bill Boakes, the operations manager for the Pahiatua and Longburn sites. "This is giving more choices for us during the peak season, mid to late October."
However, Fonterra has lowered its projected milk take, which it believes will be down by two per cent against last year.
"It's down as farmers adjust to the lower payout," Mr Spurway said.
(Farmers have told the Dannevirke News they are culling cows more aggressively this year because of the high price they are receiving and are now carrying over fewer cows than in previous years.)
"We are expecting farmers will respond to the lower prices in terms of supply, but milk coming into Pahiatua is climbing very quickly at the moment and Fonterra expects to invest in higher value products and we're currently building a new plant at Lichfield in southern Waikato which will be ready for next season."
The first milk was taken through Pahiatua's new dryer on August 18, with short runs to begin with. Now the dryer is on 24-hour operation, with eight staff working on each of the four shifts.
"The new plant runs 30 days before stopping for a 12-hour clean-up," Mr Boakes said.
And while P3 is in full production, it's still going through testing.
The Pahiatua dryer is expected to come in under budget and Mr Spurway said it was the company's responsibility to build on time and on budget.
"We then run them as efficiently as possible, extracting the most from the milk. But having the asset is one thing. It's having the people to run it and our team has huge capability.
"This new plant is unique, in its re-use and recycle processes. This is taking it to the extreme of technology," he said.
"More milk can be processed, but because we re-use the water, the water take is the same. And the heat produced is re-used too."
Mr Boakes explained how water extracted from milk was cleaned by reverse osmosis and re-used.
"It's the first in New Zealand and we haven't increased our consented water take even though we've more than doubled our milk processing. It means we're able to meet our commitment to sustainable best practice, despite the additional volumes this site will generate."
Fonterra has also built a water treatment plant that puts water back as irrigation on three farms owned by the company. The company also has a lease deal for irrigation on a fourth farm.
The new dryer at Pahiatua, along with a new distribution centre and reverse osmosis water plant, were built to cope with milk already being supplied by dairy farmers throughout the region.
"We were under pressure at the peak [of the season] and by optimising production in the most efficient plants in the world, we reduce our costs," Mr Spurway said.
Almost a replica of Fonterra's Darfield plant, except for base isolation technology, which allows the Pahiatua plant to withstand a one-in-2500-year earthquake, the project has benefited from an experienced team building, commissioning and running it.
•185 staff are employed at Fonterra's Pahiatua plant, including tanker drivers.
•Along with the new dryer's processing capacity of 2.4 million litres of milk a day, Pahiatua's two existing wholemilk powder plants can process 1.3 million litres of milk a day.