Insight Focus
- Non-Fonterra dairy processors gain ground.
- Small processors can have outsized impacts on New Zealand’s exports.
- The weather in Dec-Apr can also have a significant role.
After a hiatus since November 2020, Tom Soutter is back providing you with dairy content on Czapp. His articles will recur monthly going forward and will initially follow the aggregate milk flows of the smaller dairy producers in New Zealand.
- While Fonterra dominate milk collections in New Zealand with 79.5% market share (through Fonterra’s financial YTD) there are a number of other processors in New Zealand who collect, process and in most cases export their products to the world.
- Non-Fonterra dairy processors include Open Country Dairy, Synlait, Westland Milk Products, Tatua, Oceania Dairy, Miraka, Mataura Valley Milk, Yashili NZ, Waiū Dairy, Goodman Fielder and Danone NZ.
- To truly understand what is happening in New Zealand from a dairy product supply perspective it is important to understand where these processors are located, what they produce, and what is happening with their milk collections specifically.
- In the past three-and-a-half years these processors have continued to grow as a bloc, increasing their share of NZ milk collections from 18% to 20.5%.
- As the non-Fonterra share increases, the supply of certain dairy products may also become slightly more susceptible to weather.
- December to April is known in New Zealand as the “shoulder period”. This is the point of highest risk to global dairy product supply: it’s off-season in the Northern Hemisphere and New Zealand collections are susceptible to weather. Relatively hot and dry conditions can lead to a shortage of supply and higher prices and vice-versa.
- This year NZ has had a very wet shoulder period which has kept pastures in unseasonably good condition and thus milk collections have caught up to average levels for this time of year after a slow start.
- It is interesting to note that while Fonterra only posted a 0.66% recovery in milk collections YoY for March, the Non-Fonterra collections surged up 2.15%.
- Fonterra can optimize and move milk around in their system, but many other dairy companies supply few factories. These processors might be more sensitive to changes in milk supply following localized weather disruption. That is, they collect milk and process it into the fixed set of products which their plants can make. When there is more milk being collected by these processors, then the relative volume of products which they produce can increase disproportionately vs. market expectations.
