Green Valley Dairies says it will be forced to approach Fonterra farmers around its factory in Mangatawhiri, South Auckland, if the Dairy Industry Restructuring Act (DIRA) raw milk supply is removed.
Green Valley general manger Corrie den Haring says it doesn’t see any sense in ending supply to domestic processors.
“We will be left with no option but to look for Fonterra farmers in our catchment areas and that will only fragment the supply base,” he told Dairy News. “We don’t see lot of sense in this. It weakens every player including Fonterra.”
In its discussion paper on DIRA raw milk regulations reforms, MAF recommends a three-season limit for independent processors with their own supply. Fonterra shareholders support this.
Green Valley supplies fresh milk for the domestic market but unlike Fonterra and Goodman Fielder its products are not sold in supermarkets. It supplies dairies and fruit and vegetable outlets.
The company buys 12m L of DIRA milk from Fonterra to supplement supply from its three organic and a conventional farm near the factory. It also buys milk from contracted local farmers. Green Valley currently processes 20m L a year.
However, the factory only operates a single shift five days a week leaving spare capacity.
Den Haring says under its growth strategy it will need about 100m L of milk in three years.
“We’re looking at 30-50 suppliers. The proposed DIRA reform will force us to look at Fonterra’s suppliers and will put our good relations with the co-op under strain.”
Green Valley accepts the way the DIRA farmgate milk price is set. It is fairly transparent, says den Haring.
“Fonterra has taken a fair and pragmatic approach in setting milk pricing at the farmgate.
“The current debate is about milk used by export focussed dairy companies.
“They are using milk in a manner not foreseen and expected.”
But it has reservations about the ‘October rule’ that controls the quantity of regulated milk an independent processor can take in each month, based on the quantity of regulated milk the processor took in October, the seasonal peak.
It is used by Fonterra to prevent independent processors from taking most of their regulated milk in the shoulder months when their supply is low.
Den Haring says it prefers a consistent milk supply throughout the year. “Right now we have to fit our model into seasonal supply curve.”
He believes New Zealand’s milk supply curve must change.
“We manufacture long shelf-life products such as milk powder, cheddar cheese and butter, so there are no strong signals back to a farm that we require milk all year round.”
Green Valley’s three farms have a flatter milk supply curve.
