The co-operative made the premium offer April 16 in a letter to suppliers in those regions in light of increased Asian demand for the mozarella cheese it makes at its Clandeboye factory, South Canterbury.
Fonterra head of cooperative affairs Stuart Gray says the initiative is an “opportunity to consider a longer-term winter milk programme” on which farmers will be updated later in the season.
Gray was giving away little on what shape that might take when he spoke to Dairy News last week but it seems Clandeboye’s mozzarella plants – a second line is due to be commissioned this winter – is at the heart of it.
“It sends a strong signal that Fonterra is looking to be very proactive in adding more value to more things with more velocity and speed,” he said, echoing the co-operative’s 3V – Volume, Value, Velocity – strategy.
Whether those who supply this winter could be first in the queue for future winter milk deals hasn’t been looked at, Gray says, though the co-operative will know who they are.
“We’re not doing winter milk contracts as we would normally do during this [June-July] period. We’re just saying we’ll take it at a premium, less a transport cost… We have some long-standing winter milk contracts and we’ll certainly be carrying on with those.”
However, Dairy News subsequently learnt that a valuable winter milk contract to supply Cadbury, which was paying some Southland suppliers more than double the $1.40 premium offered, isn’t being renewed as the chocolate maker has decided it can manage without milk in June and July.
Gray says Fonterra is “very pleased” with the uptake of the $1.40 offer and despite the late notice it has been well received by farmers.
“They understand the opportunity came along late in the piece and it’s an opportunity for some farms to look if they can do something this winter and earn a premium.”
The $1.40/kgMS premium is “comparable” to normal winter milk terms in the Clandeboye catchment and is “a number that provides us with added value for the cooperative as a whole,” he adds.
South Canterbury dryland dairy farmer and Shareholders’ Council representative John Gregan welcomed the move.
“It’s an opportunity for Fonterra shareholders to get extra money,” he told Dairy News. “The way it’s been handled is very transparent and it’s very simple.”
The staggered transport charge, which Dairy News understands nears 80c/kgMS from the far south-west of the offer area, isn’t a concern, he says.
“They want the milk at Clandeboye so it makes sense to get it from as close to Clandeboye as they can. Effectively it’s a specialty milk, a bit like colostrum.”
But Gregan’s Shareholders Council counterpart in Southland, Vaughan Templeton, says there have been some grumbles about the transport charge in his ward. “The comments have been that it’s better than nothing but after the transport charge there’s not a lot left so they’re not all happy.”
Fonterra said the transport charges associated with the premium Clandeboye deliveries and the volume required are commercially sensitive, refusing to disclose figures to Dairy News.
