Open Country Dairy Expands Butter Production with New Plant

The new plant will have the capacity to process 30,000 tonnes of butter per annum and will be commissioned at the end of 2027.

Open Country Dairy (OCD) is also boosting production at its first butter plant in Waharoa, Waikato.

The plant, which opened in November last year, can process 20,000 tonnes of butter; another 5,000 tonnes of capacity, mainly producing small packs for retail, is being added.

OCD chief executive Mark de Lautour says the expansion will give the company a nice balance between North and South Islands.

Milk Fat Has Become Increasingly Valuable

OCD chief executive Mark de Lautour says the expansion will give the company a nice balance between North and South Islands.

De Lautour told Dairy News that currently there's a big focus on the fat component of milk.

"For years everyone said processing milk was about taking the water out of milk.

"It's not that anymore, it's taking out the protein and fat, which are of course the valuable parts."

Global Butter Prices Have Stabilised After Record Highs

On the Global Dairy Trade auction, milk fat prices rose to record levels last year before coming down in recent months.

Butter prices rose to a record US$8,000/metric tonne one year ago. In the latest GDT auction, butter price dropped 2.4% to US$5516/MT.

Anhydrous milk fat price dipped 1% to sit as US$6601/MT at last week's auction. It reached over US$7600/MT earlier this year.

Expanding Product Options Across Protein and Fat Categories

De Lautour says the investments also ensure the company has options on protein and fats.

"For proteins we've got skim and whole milk powders and cheese; cheese of course is casein and whey is an increasingly valuable protein that falls out of the cheese-making process. So, we've got plenty of options on the protein side.

"But on the fat side, we only had AMF or whole milk powder. Butter has therefore given us the optionality of WMP, AMF or butter to utilise the fat component of the milk."

The company looked at other milk fat options like cream cheeses and UHT cream, which are performing better than butter right now.

However, they are currently limited for market options and pricing is largely "China-driven", noted de Lautour.

"Especially the UHT cream, a lot of that going into China," he says.

"And the big Chinese manufacturers are also building UHT whipping cream and cream options.

"So, we'd rather do products where you can sell it to 20 or 30 countries rather than just a handful.

"That's a very Open Country thing - pick a product, do it very efficiently at a high quality level and keep it simple. But make sure you've got options."

While butter plants don't necessarily require more milk, Open Country is still looking for new suppliers.

De Lautour says they are looking at additional cheese plants on both islands.

"We're just working out what type of cheese, and which is the priority, North Island or South Island."

A Big Year

It's been a busy 12 months for Open Country Dairy.

Apart from opening its new butter plant at Waharoa, the company acquired two milk processing plants - Miraka in Mokai (near Taupo) and Mataura Valley Milk in Gore.

The ice cream business of Open Country's parent company Talley's has also come under its fold.

Mark de Lautour says processing capability at both plants has improved and they are now making money.

"Both those sites had significant inefficiency and high costs and we've tightened it up.

"It's been a really big year: the company is significantly bigger than it was a year ago.

"So, this year is just getting our arms around that, making sure everything delivers."

'Milk Price Plus'

On the milk supply side, it's also been a good year for Open Country Dairy.

The company recruited over 60 new suppliers taking its supplier base to "well over 1200", says Mark de Lautour.

He says the company will always welcome new suppliers.

"We're always looking for people who want to come and give us a go.

"We give farmers a choice and there's lots of interest from farmers to give us a go."

Open Country offers farmer suppliers choices when it comes to milk payments: both options provide monthly advance payments, but they can then either be settled in full four times per year or they can choose the ‘Milk Price Plus’ payment model. Under this system, they are still paid advance rates, but the final milk price is what the farmer would get paid under Fonterra’s farmgate milk price (FGMP) model, plus an additional 10c/MS.

“They can choose on the fast cash, four settlement model, or they can do the more traditional dairy industry payment plus 10c model,” says de Lautour.

“When we pay suppliers using the more traditional full-season wash-up way, we benefit working capital-wise.

“The fact that we get to hold onto this money longer saves us interest costs, which we then return by way of the extra 10c.”