Guy Trafford assesses where dairy companies ended up with their 2021/2022 season milk payout levels, with variations not as wide as previously

With Fonterra paying out a record payment to farmers this year it seems timely to see what the other processors are up to.

Some like Westland and Oceania (which is also owned by Yili) have been linked to the Fonterra price as a minimum seemingly give or take a few cents as last year it’s reported pay-out was $0.04c per kgMS behind the Fonterra price without any dividend added in. (Fonterra $7.54 vs Westland $7.50)

When Westland sold to Yili it was stated that the Fonterra price was to be the minimum it would pay out to farmers. Given the record price paid out this year by Fonterra, Westland farmers should be rubbing their collective hands together. Westland have also just announced that they are adding another string to their butter bow with the purchase of Canary Foods in the Waikato.

Canary, a New Zealand owned company, have developed an innovative way to produce butter ‘medallions’ as well as producing other dairy based food service items and so with their addition, should strengthen the Westland balance sheet in the future.

Oceania, also owned by Yili, last year was ahead of Westland at $7.70 and more closely matched Fonterra’s total pay-out to farmers. They are on record that they will pay Fonterra price plus 15c. It will be interesting to see whether they can honour this when the final pay-outs are announced.

Tatua Dairy are once again looking as though they will be leading the pack of pay-outs to farmers with last week announcing a record $11.30 per kgMS. Milk solids collected were 6% behind last years levels but despite this with an income of $444 million are nearly $50 million up on last year ($395 million) and this is despite having greater stocks on hand due to ‘slow’ logistics. They are providing a conservative $10.00 per kgMS forecast price for next year.

Open Country, (OC) New Zealand’s second largest dairy processor, is also on track to pay its farmers good returns. Near the end of August, it was reported as paying its suppliers $9.84 per kgMS for milk supplied for the months February through to and including July. This came on the back of $10.00 being paid for milk supplied in December (2021) and January. It says its average season 2021/22 payout was $9.45 including the "estimated cashflow value" of its four in-season payments. Given the Tatua and OC pay-outs and their quite different product and ownership profiles it starts to make you wonder what has been holding Fonterra back? Perhaps we’re just getting a bit picky.

Fortunately, the news for Synlait has been better than the previous years results when it was severely impacted by the pandemic. They have posted a profit of $38.5million which comes on the back of a $28.5 million loss last season. The pandemic also coincided with a period of high spending for Synlait with the new Pokeno plant and purchasing the Talbot Forest cheese manufacturing plant plus Dairy works. These purchases appeared to be aimed at moving Synlait away from being too reliant on A2 for the bulk of their income and develop food products of their own, including plant based food. However, investors cannot have been overly impressed with the result as the Synlait share price dropped 5.3% to $3.57 per share. It’s final pay-out price is matching that of Fonterra with the final average base milk price to farmers being $9.30 per kgMS for the 2021 / 2022 season. This is the highest base milk price Synlait has paid. In addition, an average of $0.29 per kgMS was paid for incentives, taking the total average milk payment to $9.59 per kgMS for the 2021 / 2022 season. Tight global milk production and solid demand for dairy have resulted in Synlait’s forecast average base milk price remaining at $9.50 per kgMS for the current 2022 / 2023 season.

It is looking like last season's final pay-outs to farmers are going to be more closely grouped than they have been for some time. To date only Tatua stands out as an outlier but even they are closer to the pack than we have seen for a few years with their margin normally out to $2 -$3 dollars per kgMS ahead. This year although a very good result ‘only’ $1 - $2 ahead.

We maintain a payout price page for all companies here. Not all companies are forthcoming with accurate information, so if you know of updates that should be reflected, please contact us.