By LIAM DANN primary industries editor
Tiny independent dairy co-operative Tatua will pay its 132 farmers $5.60/kg of milk solids - a dramatic increase on its own estimates and $2 more a kg than Fonterra farmers are expecting when the dairy giant announces its result this morning.
The timing of the announcement
is cruel for Fonterra managers who must explain to 12,600 farmer shareholders why their payout has been slashed from last year's $5.30 to an expected $3.60.
This year Waikato-based Tatua estimated it would pay farmers just $5/kg for the 2002/2003 season. The surprise increase was the result of a currency hedging policy which had limited the adverse effects of the high kiwi dollar more than expected, said chairman Alan Frampton.
Fonterra argues that comparisons with Tatua are unfair because the companies are in almost totally different businesses.
Fonterra, selling high-volume products like butter and milk powder, is a slave to the international commodity cycle, which has been unfavourable in the past 18 months.
Tatua specialises in high-value branded products like processed whipped creams. It also sells high-tech dairy ingredients for dietary supplements and infant formulas.
Even Frampton says any comparison is unfair.
"We're in an entirely different business and in different markets."
But that hadn't happened by accident, he added. "There's been 20 years or 30 years of investment and effort."
Tatua was still affected by the commodity slump, but not to the same extent as Fonterra, Frampton said.
Last year it paid its farmers a record $6.77/kg of milk solids.
Fonterra did have a significant value-added component to its business too but proportionately it was much smaller than Tatua's.
Tatua yesterday said it had total turnover for the 2002/03 year of about $115 million - a similar figure to last year.
Capital expenditure for the year exceeded $7 million.
New Zealand's other independent dairy company, Westland Milk Products, is also expected to top Fonterra's payout. It has estimated it will pay $3.90/kg of milk solids.
It will announce its final result on August 1.
