What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The growth of the organics business is good news for the whole co-operative, says Paul Grave, head of co-op affairs for Waikato.
"Organic farmers actively participate in creating value by providing Fonterra with a certified organic milk stream, and all farmer shareholders share in the value created by the organic business through dividend payments."
Increasing demand for organic milk products, and organic food in general, is leading to high prices for these products in international markets. While global milk prices have been volatile recently, prices for organic dairy ingredients have remained at the same relatively high levels since 2013-14, says Grave.
"Organic milk prices are high because consumers' appetite for organic milk products is growing faster than supply."
The margins the cooperative is achieving on its organic milk products are similar to some of its highest-earning consumer and food service products.
"By selling higher-value products at premium market rates, the long-term organics strategy reflects Fonterra's priority to drive more value from every drop of milk," says Grave.
