Farmers get big Tatua payout

By PHILIPPA STEVENSON agricultural editor

The Tatua Co-operative has again proven to be David to the Goliaths of the dairy industry, hitting the giants with a large payout right where it hurts - in their profit centres.

The one-factory Waikato company will pay its 140 suppliers $4.20 a kilogram of milksolids for the 1999-2000 season.

It is the sort of payout the rest of the country's dairy farmers can only hope for.. This year, neighbouring New Zealand Dairy Group, with 7800 suppliers, paid $3.75 a kilo, and Kiwi Dairies' 5700 suppliers got $3.82.

Tatua's cash premium above the Dairy Board base price of 83.72c is more than double Dairy Group's 40c and well over Kiwi's 47c. To that the company has added imputation credits of 1.28c a kilo.

Tatua chairman Dr Alan Frampton said the premium was a record above the Dairy Board price but only a few cents more than last year's 80c, so not exceptional.

"We really haven't done anything remarkably different in this season, but we are pleased because it looks like it might be sustainable."

Dr Frampton said the result justified 20 years of investment in high technology and product development, including cumulative spending on new plant and equipment since June 1994 of around $25 million.

Tatua had not gone down the track well trodden by other companies that built large plants to get economies of scale. Instead, it had concentrated on developing niche markets for very specialised, high-value, low-volume products.

The company could not be a model for the industry but its business style could, Dr Frampton said.

"We've tried to specialise in products and operations that would suit a smaller company.

"But the principles that we've adopted apply to the rest of the industry, [which] ought to be trying to find the higher-value markets, even large-scale niche markets, for its products, and as far as possible reduce the dependence on commodities such as butter and cheese.

"The principle of adding value, to a country that is remote from its markets, is a very sound one, and we ought to pursue it."

Dr Frampton said Tatua was expanding production by adding value to raw materials which it bought in.

It was not looking to increase its supply base, although there was no lack of interest from farmers attracted by the consistently highest payouts.

"Our turnover is $10 million up on last year, partly due to price increases, but our volumes of high-value products are rising."

Dr Frampton said he still believed the mega merger between Dairy Group, Kiwi and the Dairy Board was in dairy farmers' best interests.

Tatua, however, would not become part of the mega co-op, although it would be keen to "negotiate with a united entity to see how we could cooperate and work together."