Global Dairy Trade Recovery Puts $9.50 Milk Price Within Reach
A solid recovery of global dairy prices this year makes a $9.50/kgMS milk price almost a shoo-in for this season.
The phone calls, made after a board meeting, relay the final milk price for the financial year just ended.
This year’s call was special: the co-op, celebrating its 100th birthday, announced a record 2013-14 payout before retention of $10.32/kgMS. Tatua suppliers will get $9/kgMS for milk supplied last season; the company retains $1.32/kgMS.
Tatua chairman Stephen Allen says shareholders were “incredibly appreciative” of the result.
“We ring our farmers after the final board meeting for the season and give them the results before anyone publicly knew,” Allen told Rural News. “The six farmer directors get on the phones; we’ve always done this.”
Allen says Tatua farmers were “100% supportive” of the decision to retain $1.32/kgMS, most of which will fund a $65m specialised powders dryer under construction. The dryer will not process milk but produce specialised ingredients for global infant formula manufacturers.
The record payout puts Tatua at the head of the 2013-14 payout stakes, ahead of other New Zealand processors including Fonterra.
Allen says the co-op was prepared for “a more difficult year” than eventuated; at the start of the season it had budgeted a payout around $7.00/kgMS.
“Every year what we forecast and what actually happens are two different things. It’s hard to predict and the start of the year can be a very different world from the end of the year.”
Last season was an exceptional year for all Tatua business units. Unlike most other New Zealand dairy processors Tatua doesn’t produce milk powders, infant formula or UHT milk. Instead, it is a world-renowned supplier of quality specialised ingredients and foods. Tatua’s key markets include Japan, US, China and Australia.
Its specialised added value (SAV) businesses produce a diverse range of products including hydrolysates, lactoferrin, mascarpone, crème fraiche, aerosol cream, natural dairy flavour ingredients and bionutrients.
Allen says every part of the business had a good year. “Our hedging policies also worked well to protect us from the high exchange rate.”
Commenting on the current season, Allen says the market remains soft for all dairy products.
Tatua has budgeted an opening forecast payout of $6-$6.50/kgMS for its suppliers this season. This month the board will review results for the first three months of the year.
Allen says it’s still early days and Tatua is asking farmers to budget on the “conservative end” of the forecast. “We are determined to stay above $6,” he says.
Milk supply for the season remains slightly higher than last season, thanks to a mild winter and a good spring. Tatua expects to process 18 million kgMS this season, compared to 17 million kgMS last season.
No more DIRA milk
TATUA HAS stopped receiving milk from Fonterra farms under the DIRA raw milk regulations.
Chairman Steve Allen says the co-op expects a modest lift in supply from its suppliers; it also has a trading arrangement with other independent processors.
Allen says Tatua took “a reduced amount” from Fonterra last season. “We haven’t taken any milk this year,” he says.
But milk growth is not high on Tatua’s agenda. Allen says while
over time its suppliers will expand, it is not looking to grow milk supply rapidly.
Not taking DIRA milk from Fonterra will not impact the co-op, he says.
“It’s fair to say for both our farmers and Fonterra farmers it’s been an uneasy arrangement – more of a perception thing. It has passed its use-by date and we’re comfortable it’s not there.”
