Wednesday, 25 July 2012 15:15

Fonterra 4th in dairy ranking

Written by 

FONTERRA IS the fourth-largest dairy company globally in Rabobank’s rankings released last week but the bank expects vigorous competition in the coming year as companies ‘jostle’ to position themselves for changing markets.

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.

More like this

Fonterra trims board size

Fonterra’s board has been reduced to nine - comprising six farmer-elected and three appointed directors.

Returns 'not good enough'

Fonterra leaders are making their case for offloading the co-operative's $3 billion consumer business, noting that its return on capital has been nowhere near respectable.

Record milk price!

A record farmgate milk price for Fonterra shareholders is all but confirmed for this season.

Chinese strategy

OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.

Featured

Massey Research Field Day attracts huge interest

More than 200 people turned out on Thursday, November 21 to see what progress has been made on one of NZ's biggest and most comprehensive agriculture research programmes on regenerative agriculture.

Expo set to wow again

Stellar speakers, top-notch trade sites, innovation, technology and connections are all on offer at the 2025 East Coast Farming Expo being once again hosted in Wairoa in February.

A year of global challenges

As a guest of the Italian Trade Association, Rural News Group Machinery Editor Mark Daniel took the opportunity to make an early November dash to Bologna to the 46th EIMA exhibition.

National

OSPRI's costly software upgrade

Animal disease management agency OSPRI has announced sweeping governance changes as it seeks to recover from the expensive failure of…

Machinery & Products

BA Pumps expand

Cambridge based BA Pumps & Sprayers, specialists in New Zealand-made spraying equipment, has acquired Tokoroa Engineering’s product range, including the…

Entries open for innovation award

Fieldays and its renowned Innovation Awards are celebrating their 57th year, marking a longstanding tradition in the agricultural calendar, with…

» Latest Print Issues Online

Milking It

Chinese strategy

OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.

Not fair

OPINION: The Listener's latest piece on winter grazing among Southland dairy farmers leaves much to be desired.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter