Last month the dairy industry conducted the 15th Global Dairy Congress which was hosted in Laval, France.
Fonterra was represented by Kelvin Wickham, Chief Executive Officer AMENA (Africa, the Middle East, Europe, North Asia and the Americas). Wickham facilitated a session on moving dairying to being more sustainable, (practical steps towards net zero). Looking at the attendees list it appears that all the big players attended.
The items highlighted from the Congress in particular are the “Innovation Awards”. Unfortunately, I can’t say that New Zealand featured, however, ‘we’ did have a connection. Yili who have Westland and Oceania (making then #3 in size in New Zealand) in their stable did feature with six innovation awards, the most of any one company. One judge commented that “Yili have their finger on the pulse when it comes to identifying gaps in the market and creating brilliant innovative products that both taste and look great while simultaneously serving a purpose."
The company scooped awards for its packaging design, infant nutrition, intolerance-friendly dairy products, ice cream, cheese and dairy snacks. China is continuing to grow its love affair with dairy products and ice creams are paving a pathway for high sales for innovative companies. Increasing consumption +10% annually, over a third of all ice cream consumed globally is in China.
Flavours are growing more and more exotic with alcoholic flavours in particular growing in demand. Kiwi’s are among the world’s largest consumers per capita at approx. 23kgs and China is New Zealand’s largest overseas ice cream market. Currently 12,000 tonnes are exported worth around NZ$70 million. However, when the Chinese market is valued at US$1.3 billion there is plenty of potential for expansion.
Picking winners by subsidising investors
The Government have turned their attention lately to assisting a Southland company to set up oat milk processing. Minister for Economic and Regional Development Stuart Nash announced the cash injection of NZ$6million this week. To be based at Makarewa, north of Invercargill and with the capacity to produce up to 80 million litres of plant-based milk a year the company already boosts some heavyweight investors with Sir Stephen Tindall’s investment company K1W1 being the majority shareholder alongside the Southland regional development agency Great South. Minister Nash was careful to say that he sees it as “dairy and oats” not "instead of".
Perhaps there was a hint that forestry processing is also in line for some assistance as Minister Nash also said: “It’s like our logs, why are we growing it here and then sending it off overseas for somebody else to process?”
Not shy at sharing the love around, earlier this year the Government invested a further NZ$8 million into Spring Dairy to help develop their sheep milking initiative. Part owned by LandCorp this is the second large grant they have received from the Government with NZ$12.5 million being given to help establish the company in 2015. It certainly appears useful having friends in high places.
Synlait's payout forecast
Synlait have come out with their payout forecast for the 2022/23 season. A close match to Fonterra’s at $9.50/kgMS it is up +50 cents on its earlier prediction. There was no change to its forecast milk price for the 2021/2022 dairy season, which remains at $9.30 per kgMS.
Unlike Fonterra, Synlait does not provide a risk spread which given the current global conditions is brave. However, the forecast price is never set in concrete. There have been some criticisms that Synlait’s forecast price incorporates a little bit of smoke and mirrors with farmers at times disappointed with what actually comes into the bank once ‘adjustments’ have been made.
A history of all dairy company payouts, including for Synlait, is here.
Dairy prices
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10 Comments
Too bad there wasn't an award for setting fire to piles of money. Maybe that could be the alternative to coal burning milk dryers. At least its innovative. At least its good to see the names of companies winning awards that purchased Fonterra assets at a fire sale discount.
Synlait suppliers can't be surprised at Synlaits payout 'adjustments'. Afterall they sold so called fair value Fonterra shares in order to supply Synlait, knowing full well that with no ownership their supply is a cost to be minimised. All non-farmer owned processors employ the same strategy of payout attached to fish hooks.
Would be interested to know the rich listers views on free market economics and the governments role.
I vaguely recall reading a book by economist Ha-Joon Chang in which he detailed South Koreas economic transformation and how the government defied the World Bank et al, in developing heavy industry, concluding the government can pick winners. It worked well for them, but our directional strategy seems more ad-hoc, and ineffective; accoya wood treatment technology springs to mind.
Good grief. On a level playing field, and without that Danish crook trying to run Fonterra into the ground, Synlait, Danone, and Yili can't compete with Fonterra in terms of quality and efficiency. The trick is to have a level playing field. The other trick is to never have non dairy farmers owning Fonterra. They only dilute the payment of profit. Ask the Kenyan coffee farmers what happens when non coffee farm owners own the means of production.
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