Cool response to Fonterra expansion

29 Jan, 2018 09:46 AM
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Fonterra Australia managing director Rene Dedoncker: We have a clear strategy that is delivering sustainable returns,
It’s a good sign, but it’s not going to have me rushing out to buy a Rolls Royce, anytime soon.
Fonterra Australia managing director Rene Dedoncker: We have a clear strategy that is delivering sustainable returns,

There’s been a muted response from Victorian dairyfarmers to plans by New Zealand dairy giant, Fonterra, to spend more than AU$165 million on plant expansion this financial year.

Fonterra has announced the Victorian and Tasmanian expansion, to increase capacity and meet what the company said was “unique demand opportunities for dairy.”

The investment is made up of about $130 million to put in 500 million litres of additional capacity, and a further $35 million for a range of annual site improvements.

Fonterra Australia managing director Rene Dedoncker said customers wanted trusted supply options out of Australia, especially for products like cheese, whey and nutritional powders, which were in high demand.

“We have a clear strategy that is delivering sustainable returns,” Mr Dedoncker said.

“To create value, we need to invest to stay ahead of the demand curve.

“These investments support our aim to secure positive returns back to our farmers on both sides of the Tasman.”

But while several Victorian farmers said the investment was a positive sign for the industry, it would take more than that to restore full confidence.

South Gippsland Fonterra supplier Marian Macdonald said it showed Fonterra believed there was a good future in the Australian dairy industry.

“But I can’t imagine there is enough confidence yet, to justify wholesale expansion of production,” Ms Macdonald said.

“We need to see, not only a light at the end of the tunnel, but good steady signals – not the roller coaster, we have been going through.

“It’s a good sign, but it’s not going to have me rushing out to buy a Rolls Royce, anytime soon.”

Fellow Gippsland producer, Paul Mumford, Wron Wron, agreed the decision was positive.

“Fonterra has had a flawed track record, but its good news for the dairy industry, generally,” Mr Mumford said.

“It should help deliver profits back to the farmgate, and that’s the most crucial point, as well as adding jobs to the local community.

“It adds a little bit more pressure for competitive milk, moving forward through the season, which is reassuring.”

But former Fonterra supplier, Karinjeet Singh-Mahil, Crossley, western Victoria, was scathing of the company.

She said some company field officers were talking about an opening price of $4.70 milk solids/kilogram.

“If they do that, they won’t have any milk for their plants,” Ms Singh-Mahil said.

“To be honest, how are they going to have milk if they can’t pay the farmers to produce it?”

She said she did not believe the expansion would entice more farmers across to Fonterra.

“It’s not just about price, it’s about the lack of security around that price – if they start higher, how do we know they’re going to stay there,” she said.

Paul Stammers, Katunga, Vic, said he milked 180 cows, out of a 250 herd.

“I’m happy there is extra stainless steel out there, to process milk, but if they want to fill it, they are going to have to pay,” Mr Stammers said.

“That’s the only thing that will attract new supply, you are not going to leave a processor for the same, or less.”

A Parmalat supplier, he said it was unlikely farmers would move to Fonterra “just because they have a new facility, the margins are that fine.

"If you can move to another processor and make $20,000, it’s definitely worth it.”

Buffalo’s Peter Young, a Murray-Goulburn (MG) supplier, has a 300=strong herd and said he “thought very little” of the expansion.

“Fonterra has not shown itself to be an ethical player in the Australian industry,” Mr Young said.

“It dropped the milk price when MG did, not because it had too but because it could.

“It didn’t pay back its suppliers back the money it took away from them, but spread it amongst them and new suppliers to gain more supply at MG’s expense.“

He said Fonterra had shown itself to be untrustworthy in the past.

“I can’t see why they should be trusted in the future,” he said.

Mr Dedoncker said the Stanhope investment largely focused on expanding the site’s cheese-making capacity, and doubling the daily milk volumes it could process.

The investment would double the size of the cheese plant, increasing cheese production by a further 35,000 metric tonnes for a range of cheeses including cheddar and mozzarella.

At Fonterra Australia’s largest site of Cobden, $13.5 million was earmarked for robotic palletisers and improvements to the butter plant that produced Western Star, while another $8.6 million is being invested at Dennington in a new 25-kilogram packing line for nutritional powders and efficiency improvements.

The $9.7 million Wynyard, Tasmania investment would support an annual increase in cheddar cheese production by around 3900 metric tonnes and increase the daily milk volumes processed from 1.3 million litres to 1.5 million.

At Darnum, the investment would support higher production of nutritional powders, whole and skim milk powders for the domestic and international export markets.

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Andrew Miller

Andrew Miller

is a journalist for Stock and Land
Twitter: @journoandy26

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