Fonterra's season-to-date NZ milk collection falls more than aggregate for industry

Tuesday 1st May 2018

Fonterra Cooperative Group's milk collection this season is tracking 2 percent lower than in 2017, a steeper decline than for the industry as a whole and suggesting rivals have picked up more of the national milk pool.

Fonterra's global dairy update says the company collected about 1.31 million kilograms of milk solids in New Zealand in the 10 months ended March 31. It expects production for the whole season ending May 31 will be down on the previous year at 1.5 million kgMS, an improvement on its previous estimate of 1.48 million kgMS. It cited difficult weather for the decline. Fonterra's share of the national milk pool is about 82 percent.

Figures from the Dairy Companies Association of New Zealand, which provides an aggregate of all its members including Fonterra, show milk production down a milder 1.3 percent. While there are fluctuations in the series, there is a trend of the aggregate falling less than Fonterra's, said AgriHQ analyst Amy Castleton.

Nathan Penny, rural economist at ASB Bank, said reading the two sets of figures "Fonterra is losing some share." He said there were various drivers of the move - not just the milk payout - as rivals such as Synlait Milk and Open Country don't require their suppliers to be shared up to match their production. Fonterra shares, which pay annual dividends, were last at $5.72.

"The question is for some people, they may prefer to hold other investments than Fonterra shares," Penny said. Other considerations for switching companies included the ability to supply summer milk and go organic. Farmers supplying Synlait have had the option to seek a greater return from A2 milk although Synlait now has Fonterra as a competitor for that supply after A2 Milk announced it would also work with Fonterra.

Fonterra's milk collection in Australia so far this season jumped 26 percent.

(BusinessDesk)

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