Demand is outstripping supply for Fonterra’s UHT dairy products sourced from its winter milk collection and the shortfall opens the risk that it could lose out to Northern Hemisphere suppliers. By: GERALD PIDDOCK
Fonterra offers contracts to farmers to milk from May to July when most farmers are dried off. Milk is processed from Waikato farmers at its Waitoa UHT factory into added value products.
Fonterra Matamata area manager John Wilson said the co-operative could not keep up with demand for the products, while speaking at the Smaller Milk and Supply Herds conference at Karapiro.
“The demand for the product that this winter milk is going in to, we can’t satisfy at the moment.”
After being questioned by a farmer in the audience, he said there was always a risk that the market could be lost to Northern Hemisphere farmers because of the struggle to keep up with demand.
He said Fonterra would continue to push its farmers credentials of producing grass-fed dairy as a point of selling difference. The co-operative also had strong and long standing relationships with customers that would be difficult for rivals to match if they started afresh.
Fonterra also recognised that winter milking, which resulted in farmers calving their cows in autumn rather than spring, was not a system that was possible on all farms.
“It’s not for everyone,” he said.
This year Fonterra’s winter milk contract was at $2.85 a kilogram of milk solids for North Island farmers on top of the milk price for the last two weeks of May. For all of June, it was $3.50/kg before dropping to $2.85/kg for the first two weeks of July.
For any milk supplied from North Island farmers without a contract, Fonterra would pay $0.50/kg premium for the last two weeks of May, $1.20/kg over June and $0.50/kg for the first two weeks of July.
Fonterra announced in March that it will be expanding its UHT factory to meet up with this demand. This expansion will come on line in April next year.
Eureka dairy farmer and winter milker Dan Hinton said it was simply hard for people to change their system and a system change presented a high risk.
“Change is hard and as you get older, change is a risk.”
Hinton is now in his first year fully winter milking after a difficult transition process that took two seasons because of the fall in payout.
“I got spanked hard,” he said.
“There’s a few ways to do it and before we even start, my way was wrong.”
Hinton 50:50 sharemilks 570 cows on a 170 hectare family owned farm. The cows are calved on February 20 and are mated on May 20.
He decided to switch to winter milking when the dairy payout hit more than $8/kg in 2014.
He planned to calve his spring cows and then buy autumn-calving cows, which would double his stocking rate for a short period and use supplementary feed to feed the extra cows.
He would then sell his spring cows later in the year. The milk price then plummeted and with it, cow values. Luckily, his parents were able to support him through this period, he said.
Instead of being a one year transition, the low payout and fall in cow prices pushed it out over two years.
At one stage his wife Abbie was rearing calves from February through to September every day with his two infant children at her side, he said.
“We have finally come through it and this [new] season was our first time we won’t have spring calving cows.”