Westland Milk trumps

By Chris Hutching

Friday 26th July 2002

One of New Zealand's two remaining independent milk processors, Westland Milk Products, has again trumped giant milk company Fonterra in its payout to suppliers.

It will pay a record $5.43/kg milksolids to its farmers compared with Fonterra's $5.33/kg.

Westland Milk chairman Ian Robb described the year as "extraordinary" but he said dairy farmers were mindful of the downward forecasts for the coming year.

He said most dairy farmers considering dairy conversion would be budgeting on no more than $4/kg and he believed most lending institutions have been using $4/kg as a benchmark.

But latest forecasts for international commodity prices have been downgraded and Fonterra has advised farmers its payout over the coming season could be as low as $3.70/kg, indicating some farmers will be under pressure and could defer spending.

The real test for Fonterra and Westland Milk will be how well they respond to the downturn by diversifying into higher-value products rather than producing more commodity products.

Meanwhile, Westland Milk generated revenue of $186 million from processing 337 million litres of milk, benefiting from the previously high commodity prices and low exchange rate in the early part of the season.

In recent years Westland Milk has enjoyed a growth rate of 7-8% a year, with new dairy conversions accounting for 1-2%.

Westland Milk expects to accept six new farm conversions this season of about 700 cows per farm, three of them owned by Landcorp, which plans to develop a similar number next year as part of its strategic development, according to a local manager.

A new powder plant, due for completion in August, will allow Westland Milk Products to manage an additional 1.5 million litres of milk per day. The new suppliers will assist in providing sufficient milk capacity to operate the plant efficiently.

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