Fonterra opens organic milk supply to South Island dairy farmers
South Island dairy farmers will soon be able to supply organic milk to Fonterra.
Although the Global Dairy Top 20 chart was still dominated by OECD companies, the ‘biggest strides’ were made by Chinese giants, says the bank. Yili, which joined the top 20 only last year, moved up four places into 15th, and Mengniu, moved up two places into 16th.
They were ‘riding the wave of domestic market sales growth’, the bank says.
Mergers and acquisitions have prompted some OECD companies to strengthen their position, and Rabobank expects the trend to continue in the next 12 months.
But as Rabobank reports “increasing urgency” in the fight for market position, Westpac’s latest report says the biggest news in commodity markets is the worsening US drought and skyrocketing grain prices.
“For grain reliant dairy [and meat] producers in the US this will feed through to higher costs, further squeezing margins for dairy producers,” says Westpac senior economist Anne Boniface.
The Black Sea region important for wheat markets, and India, have reported adverse conditions, says Boniface. A possible El Nino weather pattern in New Zealand would also make it difficult to repeat last season’s double digit growth in milk production.
Boniface says there could be further short-term falls in price but lower growth in supply and improved economic growth in China should see prices improve towards the end of the year.
Last week’s GDT auction recorded a 0.9% drop in dairy prices.
But meanwhile Rabobank is warning that while most top global dairy companies are in the OECD, most growth lies beyond OECD boundaries. “The ability of these companies to respond to changing global market dynamics will determine their prospects for survival and success.”
Although companies have been responding for some time to these trends, “an increased sense of urgency has entered the game of late”. Market trends have accelerated and each new acquisition or merger narrows the remaining field of targets, it says.
There has been a wave of merger and acquisitions over the last 18 months, much of it cross border, with most of the companies in the top 20 having bought other companies or entered joint ventures.
“Rabobank expects to see companies continue to vigorously pursue merger and acquisition targets in the next 12 months as they jostle to position themselves for growth and profit in a changing market environment.”
Significant moves have included: Nestle’s takeover of Pfizer’s nutrition business; Lactalis’s takeover of Parmalat; FrieslandCampina’s takeover of Alaska Milk in the Philippines; Arla’s planned merger with Milk Link (UK) and Milch-Union Hocheifel (Germany); Saputo’s (Canada) takeover of US cheese maker DCI.
Top placing: Fonterra is the fourth largest dairy company in the world.
