Kiwi Dairies Feel Economic Crunch

07:36PM Oct 15, 2008
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Fonterra, New Zealand's large dairy co-op,  reports an 11.8% fall in milk powder prices at its latest internet auction, as financial market turmoil and an economic slowdown hit demand. The average selling prices for whole milk power for December delivery was US$2865 a metric tone, the third consecutive monthly fall in prices.  
Fonterra says there is a short-term excess of supply but positive signs are emerging of increased demand for whole milk powder in the New Year. Average prices for milk powder have fallen about 34% since Fonterra started with online auctions in July. In early October Fonterra cuts it forecast payout to dairy farmers for this season by 5.7%.
New Zealand Farming Systems Uruguay is also halting its plan to develop more farms in Uruguay until the turmoil in world markets eases. The New Zealand-owned company has plans to be the world's largest corporate dairy farmer and has already converted several farms in the South American country. However, it says it is delaying any further developments until off shore and local investors can focus on it again.
Another small New Zealand dairy company, Mataura Valley Milk, is postponing plans for a $90 million dairy processing plant in Southland. It says delays in securing funding because of the global credit crunch is responsible. Construction will be put on hold for a year, until 2010. Mataura says the delays in funding meant it risked missing the start of the 2009 milking season. It is however confident it will re-start building next year.
One bit of good news: The tiny New Zealand Dairy cooperative, Tatua , has paid its 112 farmers the industry's biggest payout for the past year of $2.18/lb of milk solids.   Fonterra paid $2.15/lb. However, Tatua is also struggling with the discovery that some of its lactoferrin protein powder has 4 parts per million melamine contamination. The cause may be its own proprietary manufacturing process.