Small independent milk co-operative Gisborne Milk has gone into liquidation after finding the domestic and export markets too expensive to operate in.
Gisborne Milk, which has 12 suppliers, pulled out of the domestic market last year with the aim of moving into exporting.
It was weighing up plansto build an export dairy factory in Poverty Bay but has now decided those plans are too expensive.
General manager Dan Gaddum said transport costs, the rising price of dairy products and a need to pay competitive returns to suppliers all made serving the domestic market too difficult.
"I guess our locality was always going to conspire against us in that regard as retailers consolidated more and more to central buying and it coincided with significant increases in commodity prices," he told Radio New Zealand today.
He also criticised the default milk system which determines how much milk is made available to independent processors.
He said it was difficult to pay one's own suppliers a market rate for their milk, when competitors were accessing cheaper milk through Fonterra.
"We believe that the default milk system which is administered by the Government does not treat all players fairly if you want to operate in the domestic milk scene.
"Unless you've got economies of scale and are aligned to one or both of the major supermarket chains in New Zealand, you really are in a difficult situation with servicing those customers."
Mr Gaddum said suppliers expected returns which were relative to how others were doing in the export space. Eighty per cent of the company's suppliers were 100km from the processing factory, making transport costs too expensive.
The costs were such that shareholders decided to liquidate the company. Suppliers will switch to Fonterra in August.
