Agribusiness: New entrants make dent in supply

The achievements of Fonterra competitors such as Synlait (top) and Open Country (above) are being regarded enviously. Photo / Bevan Conley

Updated figures due out next month will show just how much milk supply has moved away from Fonterra since its formation and dominance of the New Zealand dairy industry.

In the 2013-14 season the large co-operative processed 86.8 per cent of milk. Open Country Dairy was second at 4.6 per cent, Westland third at 3.8 per cent, Synlait 2.6 per cent and Tatua 0.7 per cent.

Fonterra's farmers look enviously at the achievement of the small competitors since 2001, especially in the areas of accessing niche markets and branding. Most galling is that farmers who have left Fonterra generally don't have to stump up for shares.

Some say the new companies have been given an unfair leg-up through the Dairy Industry Restructuring Act under which they are able to receive milk at a favourable price from Fonterra.

This was to allow growth in the start-up companies' first years until they can compete on a more even playing field.

Frustrated Fonterra farmers point to Open Country Dairy's waiting list of farmer suppliers, which is rumoured to number more than 500. Open Country is 69 per cent owned by Talleys Group, and has been predicting $4.70 to $4.90/kg milk solids for its suppliers in 2014-15. It has plants at Waharoa in the Waikato, Wanganui, and Southland.

Westland Milk Products is predicting a payout from $5.60-$6/kg milk solids this year and has kept its 2014-15 forecast of $4.90-$5.10/kg before farmer retentions.

It's hoping for better returns from its move into nutritional products, limited sales from its new UHT plant at Rolleston, and higher earnings from its EasiYo yoghurt subsidiary it bought several years ago.

South Island's Synlait has reduced its 2014-15 forecast payout to between $4.40-$4.60/kg, down 10 cents on earlier predictions. And it's forecasting $5.50kg milk solids for the coming season.

Small Waikato processor Tatua is always the one to beat when it comes to payout rankings. In the 2013-14 year it hit an all-time record payout by a New Zealand milk processor at $9/kg milk solids. It started the last season predicting $6.50 kg, relying on the higher earnings of its specialised value-added products.

The 1.5 per cent of New Zealand milk coming from other companies in the 2013-14 season is sure to have grown due to a rush of recent activity. Chinese company, Yili, bought the Oceania plant in Otago and is expanding supply along with Danone at the former Gardians plant in Balclutha.

Taupo-based Miraka, owned by a several large Maori incorporations and trusts, has recently signed a deal to process milk from three Shanghai-Pengxin farms, previously owned by the Crafar brothers. Vietnamese company, Vinamilk also has a shareholding in Miraka.

The Yashili plant at Pokeno, south Auckland, is expected to open in October with plans to send over 50,000 tonnes of infant milk formula to China annually. And the New Zealand Organic and Natural Dairy Company has recently announced plans to build a plant in Otorohanga, processing organic and conventional milk into high-value infant formula, nutritional powders and cheese. Three local farmer investors are involved under an agreement with China's Herun Holdings.

Then there's the Organic Dairy Hub Co-operative of New Zealand, acting as a broker for its 30 members' milk supply. Most is being processed through south Auckland's Green Valley Dairies, with some ending up in the Lewis Road Creamery's sought-after range, and value-added products.