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12 Jan 2018

GDT lift boosts milk price forecast

A useful lift in whole milk powder prices from the latest GlobalDairyTrade auction has underpinned the New Zealand forecast farmgate milk price at $6.40/kg milksolids.

Whole milk powder (WMP) prices rose 4.2%, the biggest percentage rise since April.

Some increases for longer delivery periods (May and June) were up 5%, including a mark of US$3000/tonnes for Fonterra’s instant WMP.

The effects on milk production from lack of rain in major dairying regions had forced Fonterra to revise its seasonal collection expectation to 1480 million kg of milksolids (MS), and reduce the volumes of WMP offered on its GDT platform.

“Dry conditions are expected to continue, and even if the rain forecast early in 2018 eventuates, it will not be enough to bring production back to previously anticipated levels,” Fonterra said in a statement on December 29.

Despite rising milk production in Europe and the United States, and because NZ supplied more than half of world-traded WMP, the revised NZ production forecast boosted a flagging market.

Fonterra said it now expected the negative effect of weather conditions to result in 4% less milk this season, compared with the previous season.

Since the recent peak season of 1614m kg MS in 2014-15 Fonterra suffered three consecutive seasonal falls in milk collection, totalling 8.3%.

As a result it now had about 15% processing overcapacity at peak because it built more plants to cope with what was expected to be growing milk production, and its legislative obligation to process all milk that farmers produce.

Fonterra said better dairy product optimisation for added-value was the plus-side of overcapacity, but there must also be maintenance costs and capital expenditure loan interest payments.

The AgriHQ milk price forecast rose one cent to $6.10 after the auction, but movements in futures prices were mixed. They lifted a little for WMP but eased for skim milk powder, anhydrous milkfat and butter futures.

The AgriHQ snapshot price, based solely on the January 2 GDT results, lifted 6c to $5.71.

Senior AgriHQ dairy analyst Susan Kilsby said the lift in commodity prices at the first 2018 GDT was partly offset by a rise in the NZ dollar, now US71c.

“Our revised forecast at $6.10 remains well-shy of Fonterra’s $6.40, but the likelihood of reaching this forecast has improved given that WMP prices are tracking higher again.”

Demand for WMP remained steady, as China continued to use imported powder to make up the shortfall in its domestic milk production.

12 Jan 2018

Mycoplasma bovis on Ashburton farm

The bacterial cattle disease Mycoplasma bovis has been found on a farm in the Ashburton area.

Ministry for Primary Industries response incident controller David Yard said milk sampling done just before Christmas revealed a suspected positive result and MPI’s Animal Health Laboratory testing had just confirmed it.

“The affected farm and an associated property have been under controls since Christmas Eve as a precautionary measure.

“No animals or other risk goods such as used farm equipment have been allowed on or off the property during this time and these controls stand,” Yard said.

There has been no sign of any illness in any of the about 600 animals on the property.

Yard said MPI is now tracing animal movements on and off the farm to determine if there are links to other affected properties.

It will now check and test some 30 other farms that have had some association with the new affected property.

“Farmers in the area who have had some connection with the affected property will be contacted and those who do not hear from us in the next couple of weeks should consider they are under no increased risk from this most recent detection.

“However, if they have concerns or questions they can contact us on 0800 00 83 33 or by emailing info@mpi.govt.nz.”

MPI was also continuing tests on another Ashburton area farm that had previously returned inconclusive results. As yet, that farm is not regarded as positive though it is under controls just in case.

Planning was under way for two public meetings in Methven and Ashburton on Thursday January 11 to outline the situation.

The number of infected properties now stands at 14 – nine in South Canterbury, three in Southland, one at Ashburton and one in Hawke’s Bay.

12 Jan 2018

Westland completes its revamp

Westland Milk Products has made its final appointment to the team that will drive the company into the future.

 

Chief executive Toni Brendish has appointed Jeffrey Goodwin as sales general manager, the final position in her overhaul of the dairy co-operative’s executive leadership team.

Goodwin joins the Hokitika-based milk processor from his role as global operations vice president of James Farrell and Co, which represents United States manufacturers in the export of their ingredients and finished goods.

Brendish said Goodwin’s experience in food and ingredients sales was global in scale with a record of success in southeast Asia, Japan, China and the United States.

“He has a proven ability to grow sales, develop new markets and establish key business relationships.

“His experience is in keeping with Westland’s strategy to differentiate the company and products and form partnerships with key companies that can give Westland penetration into high-value market niches,” Brendish said.

“Using this new strategy we expect to be announcing some significant new deals this year and we’ll be looking to Jeffrey to identify, capture and deliver on more of these types of sales,” she said.

Since she joined Westland in 2016 Brendish has completely overhauled the dairy co-operative’s leadership team, bringing in a new chief financial officer, chief operations officer and Shanghai general manager.

She also elevated people and safety (human resources) to the executive leadership team and retained long-serving company secretary Mark Lockington.

“This is the team that will drive Westland forward,” Brendish said.

“We’ve already introduced efficiencies right across the board that are delivering more than $70 million in savings, giving us the confidence to predict a competitive payout to shareholders for this season with very real prospects of sustaining that sort of return well into the future.”

Westland fell behind its competitors in 2016-17 when it made a $17m loss and its payout, at $5.18, was the lowest of all the Kiwi dairy companies.

Under Brendish’s revitalisation and in just 18 months the co-operative was clearly closing the gap.

With an accomplished career with French food group Danone, Brendish was brought in as chief executive in September 2016.

At a special shareholders meeting in October far-reaching changes were introduced including a reduction of the number of directors from 11 to eight.

From the beginning Brendish said she didn’t have a problem with the company’s direction – for her, it was more about focus on execution or the lack of it.

She put an intense emphasis on cost-cutting and on growing revenue while continuing with the overall strategy of diversification that was in place before she arrived.

Her aim was to get people focused on the things that would drive revenue and cut costs.

That meant focusing on economies such as cutting photocopying costs through to treasury management and transport tendering.

The goal was to provide $78m of revenue upside and cost savings and at $77m that target was well on track and fast closing the gap with its competitors.

Westland has a forecast payout range of $6.40 to $6.80/kg for 2017-18.

While the company had signalled it would probably be at the lower end of that range it is looking significantly better than last year’s, which was well over a dollar short of Fonterra.

Westland’s forecast is within striking distance of Fonterra, which is for a milk price of $6.40/kg, topped with a likely dividend of about 28 cents a share.

The company’s UHT plant at Rolleston was now running at 50% capacity.

In infant formula Westland had expanded its customer base and its nutritionals plant was running at two-thirds capacity, which was adding significant value in terms of payout.

Westland had more fingers in different pies including making infant formula with joint venture partner China-based Taiwanese Ausnutria under the brand name Puredo.

Skim milk powder, once the mainstay of the business, had become less important but could still be funnelled into nutritionals products if need be.

It expected to produce about 130,000 tonnes of products this year – about 20% of that would be in nutritionals or infant formula and a third in butter and fats.

12 Jan 2018

Fonterra’s rules upset dying farmer

Terminally ill Northland farmer Ian Lupton has accused Fonterra of non-compassionate and inflexible enforcement of the share standard, resulting in his debt to the dairy co-operative exceeding $50,000.

Lupton, a dairy farmer and sole New Zealand breeder of the Fleckvieh European dairy-beef cattle breed, has told the media of his circumstances and waived his right to privacy.

The Fonterra share compliance department responded and the Northland regional and area managers have visited him.

They said Lupton’s options were to cease supply immediately on compassionate grounds or share up via Enforced Compliance Trading (ECT).

Because of what he said were payouts below the cost of production over two years, Lupton last season opted to feed more calves with milk and advise Fonterra with a Material Change Application that he would supply just 10,000kg milksolids compared with 45000kg and 49,000kg in the previous two seasons.

He said the dual-purpose nature of the Fleckviehs enabled him to swing between milk and beef production and feed more milk to male calves.

But he sent in nearly 33,000kg.

This season Fonterra applied a modified three-year supply average calculation, giving Lupton some latitude.

It notified Lupton he needed 25,299 shares this season and therefore had to buy 8177 shares before the ECT deadline of January 12.

Lupton refused to share up and pay the $50,000-plus expense, saying his circumstances had changed and his priority now was to pay his mortgage and keep farm expenses to a minimum.

The Lupton family had employed a dairy worker to operate the Dargaville farm in Ian’s illness.

In addition, he was in hospital for treatment for leukaemia throughout December and not able to raise money for a share purchase.

Fonterra said it could not make exceptions to the share standard for suppliers with unusual circumstances, such as illness or financial stress.

To do so would transgress the constitution and the rules that every shareholder in the co-operative signed up to.

It might be possible to agree to an early cessation of supply on compassionate grounds but Lupton said that was no option for the family financially.

In communications with Fonterra, Lupton quoted the co-operative values of honesty, openness, social responsibility and caring for others.

“We have a responsibility to all other shareholders to enforce the share standard so that all shareholders are treated equally,” general manager of share compliance Christine Burr said.

ECT consisted of Craigs’ brokers buying shares in the NZX-run market on behalf of the farmer, then adding an administration fee of 0.65% and a fixed fee of $150.

The cost was to be reimbursed from the January (paid February) milk statement and any subsequent statements as necessary, while incurring 12.8% interest on the debt balance.

Burr said all shareholders were advised of their shareholding requirement in early June and had until December 1 to meet that standard.

Those who didn’t were given a “final opportunity to comply” letter.

12 Jan 2018

Farmers make tracing stock hard

Eradication of Mycoplasma bovis is still the Ministry for Primary Industry’s goal but farmers appear unconvinced it is achievable.

Another case confirmed on an Ashburton farm this week took the total to 14 but some of the more than 800 farmers who attended packed meetings with MPI officials in Methven and Ashburton last Thursday think that while admirable, eradication is unlikely and they might have to learn to live with the disease.

The ministry’s response incident controller David Yard announced plans to test three samples of milk from every dairy farm in the country from February, including milk entering the food chain as well as milk excluded from the vat in a bid to uncover any infection clusters.

One sample will be taken as part of regular bulk milk collection and farmers will be required to provide two samples from discarded milk. Yard said that would equate to about 36,000 samples nationally.

“Mycoplasma bovis is more easily identified in milk taken from otherwise sick animals, which makes testing of the discard milk a valuable surveillance tool,” Yard said.

Mid Canterbury dairy farmer Will Grayling was one of nearly 500 who attended the Ashburton meeting and he said while officials were determined to eradicate Mycoplasma bovis the feeling at the meeting was that would be a challenge.

But the experts must have concluded it was still achievable.

“They are the ones in the know so you have got to take their word for it.”

Grayling said those attending the Ashburton meeting were keen to listen but officials made farmers aware of the importance of recording stock movements, something many had not done and which had made tracking the disease more difficult.

“There was no shirking of responsibility but we have never had the need to have done this before but it has become apparent that we need to up our game.”

Farmer Willy Leferink said many at the Methven meeting questioned whether eradication was possible given the difficulties identifying and dealing with the disease and with new outbreaks well away from the source.

Leferink said MPI officials were told restrictions were disrupting normal business such as livestock trade and farm purchases.

“There are wider implications than the disease itself and the eradication of it.”

Leferink said there was also growing frustration among farmers that infected properties were not being identified, not to incriminate those farmers, but to offer support.

Infected farms and those farming adjacent properties were being ostracised and abandoned without any help from the local community because their plight was not known, Leferink said.

Farmers were also told sales of milk to calf rearers and calves drinking infected milk then being sold could spread the disease but fertiliser spreaders and contractors were a low risk.

The latest outbreak near Ashburton was different to the case MPI said it was investigating before Christmas with the infection discovered from bulk testing of milk samples and confirmed with blood and antibody tests.

MPI could not yet confirm if it was linked to the van Leeuwen property in South Canterbury where Mycoplasma was first detected.

MPI was tracing animal movements between the farm and other infected properties, which potentially could be an association to 30 other farms.

The goal of eradicating Mycoplasma was based on a recommendation from an international panel of experts convened to provide advice on the New Zealand outbreak, which concluded eradication was feasible and the right course of action.

“It is a huge benchmark to achieve but our aim at the present time.”

The 14 infected farms were nine in South Canterbury, three in Southland, one at Ashburton and one in Hawke’s Bay but the meetings were told more cases were being found because MPI was looking for them.

Yard said tracing stock movement had been an uphill battle because of incomplete records being kept by farmers who were not complying with the National Animal Identification and Tracing programme (NAIT).

“We are finding many are not NAIT-compliant which is making it 10 times harder for us.”

He urged farmers to practice onfarm biosecurity to reduce the risk of the infection spreading, such using fencing to stop from cattle being in contact with other herds over a boundary fence.

Yard estimated 65,000 blood, milk and swab tests had been done so far to track the outbreak and a team of up to 200 people were working on it..

03 Jan 2018

Lower supply outlook boosts dairy prices

Dairy product prices rose at the Global Dairy Trade auction, as whole milk powder increased on the outlook for reduced supply from Fonterra, the world’s top dairy exporter.

The GDT price index rose 2.2% from the previous auction two weeks ago to US$3124. Some 25,400 tonnes of product was sold, down from 29,592 tonnes two weeks ago.

Whole milk powder rallied 4.2% to US$2886 a tonne.

“Last week Fonterra announced that it now expects its milk intakes for the 2017-18 season to be about 4% lower than last season as dry conditions limit pasture production,” Amy Castleton, AgriHQ dairy analyst, said in a note. “It also advised that it had started to reduce the volume of whole milk powder (WMP) available on the GDT platform in response to the lower outlook for its milk supply.”

“The reduction in the volume of WMP available at this auction and subsequent GDT events led the market to believe a substantial lift in price would occur,” Castleton said, adding that the NZX Dairy Derivatives market had closed for the New Year holiday period before Fonterra advised the cut in its milk production forecast.

“The direction of the price movement was aligned with market expectations although the lift in the price of regular grade WMP for March delivery of 3.5% was well below the 6% anticipated by NZX Dairy Derivatives market participants,” according to Castleton.

At the latest GDT auction, skim milk powder gained 1.6% to US$1699 a tonne, while butter rose 0.6% to US$4501 a tonne.

Meanwhile, butter milk powder dropped 7.3% to US$1866 a tonne, while cheddar declined 2.1% to US$3317 a tonne.

Rennet casein fell 1.1% to US$4419 a tonne, while anhydrous milk fat slipped 0.2% to US$6405 a tonne.

No prices were available for lactose.

The New Zealand dollar last traded at 71.08 US cents as of 12.46pm in New York, compared with 71.05 US cents at the previous close in Wellington.

There were 112 winning bidders out of 158 participating at the 16-round auction. The number of qualified bidders rose to 516, up from 509 at the previous auction.

03 Jan 2018

Farm system study reveals benefits

Research into innovative dairy farms reveal milk production up to 25% more per cow at lower stocking rates can be achieved with lower carbon emissions and environmental effects.

Two years ago the Ministry for Primary Industries initiated the Farm Systems Change project, effectively using a triple bottom-line measurement of farm performance: environmental sustainability, animal welfare, and efficiency and profitability.

MPI senior analyst of sector policy, Jane Davidson, said external consultants had studied the records of 17 farms over five years and determined that while differing geographically and in farming systems used, there were similarities that enabled above-average performance.

“It primarily comes down to how efficiently they convert feed into milk, that the cows are looked after, they are well-fed, fit and healthy, and this was achieved across a range of dairy systems,” she said.

Farm systems were constantly evolving, and the MPI-funded study revealed some farmers were implementing sustainable farm practices that enabled them to achieve productivity increases within natural resource limits, often reducing the farm’s environmental footprint while maintaining financial performance and enhancing the resilience of the business.

Davidson said there were some common elements across the farms studied:

• the farmers paid attention to detail and were skilled at managing a whole-of-system approach while understanding the effect of changes to that system

• they understood and managed the relationship between feed efficiency, cow welfare and environment (feed waste was minimised by matching quality and supply to cows on a daily basis)

• the environment was integrated into farm management rather than seen as a compliance obligation, and

• farmers also made extensive use of advisers that they used as a team, again reflecting the whole-of-system approach.

Davidson said these farmers were hungry for information and to find ways to improve their business, and were constantly planning what changes to adopt next.

This focus resulted in farmers achieving up to 25% more milksolids per cow at lower stocking rates and with greater pasture utilisation than the industry norm, what she described as a significant result.

“That has potentially positive environmental outcomes, but that’s the sort of thinking that we want to test and refine.

“We think what we have got here is encouraging for the industry, but we want to test and refine these ideas with the industry.”

Two more farms would be studied, and then researchers would seek to understand what made these farmers successful and encourage that knowledge to be shared so others could improve profitability, reduce their environmental impact and be less exposed to milk price volatility.

“We want to share these examples, and the principles and learnings they highlight with the industry as a catalyst for a sector-wide conversation, highlighting the possibilities and potential opportunities for the industry,” Davidson said.

DairyNZ has been aware of the MPI-funded study and has participated.

03 Jan 2018

Decoding milk’s brain food power

The New Zealand pastoral sector is looking furtively over its shoulder at the threat posed by non-animal protein sources synthetic and plant-based milk and meat.

But the dairy sector was also gearing itself up to respond by gaining a better understanding of what makes milk such a valuable nutrient source, through the Smarter Lives: New opportunities for dairy products in the lifespan research project.

Fonterra was on board with the scientists as a commercial partner and research horsepower was boosted from the Riddet Institute, Auckland University’s Centre for Brain Research, Flinders University, University College Cork and Illinois University.

The researchers were looking forward to unravelling the most critical food source required by mammals.

“As a food source milk is unusual in terms of the role it plays, initially in infant protection and growth then through early brain, tissue and bone development, in fact, almost every aspect of early growth.

“And we are only now starting to understand the role it can potentially play at the other end of life in maintaining cognitive function and health,” AgResearch science group leader Dr Jolon Dyer said.

Researchers were starting from some earlier work that indicated milk’s components played a key role in helping with brain development and might play a role in being key ingredients in smart food products of the future.

Dyer was coy on what exactly the components were, with a longer-term research goal being to take the identified components, once their value had been proved scientifically, and apply them to commercial products.

In a world where the proportion of people aged over 60 was going to increase by 56% from 900 million to more than 1.4 billion in 2030 and outnumbering children aged 0-9 by 100m, milk components were going to play a role far beyond infant nurturing.

“As we get older we experience a decrease in cognitive function and it is thought milk has the potential to play a role in mitigating that.”

A key part of the researchers’ focus included the gut-brain axis, a relatively recent link discovered by researchers.

That new area of research discovered the gut contained neurons similar to those in the brain and through them there was communication linking emotional and cognitive centres of the brain with intestinal function.

Research in the area showed noticeable improvements in the ability of rats to cope with stressful activity when their gut was supplemented by specific microbiota.

Changes in the composition of gut microflora caused by drugs, disease and diet could correlate with changes in the brain’s protein levels and overall performance.

The researchers’ horsepower included science leader Dr Nicole Roy of AgResearch leading a multi-disciplinary team including AgResearch, the Riddet Institute, Plant & Food Research and the University of Auckland covering complementary expertise in food components, auto-immune diseases and gut health.

“Roy is regarded as a world leader in the area of gut health research, researching factors which affect nutrient gene interactions and food-host interactions,” Dyer said.

The brain-gut connection was often better understood by Asian consumers, with a culture used to linking mindfulness and mental wellness through foods and herbal remedies.

“They have this understanding of the value of functional foods, including, for example, wide acceptance of probiotics.”

However, that understanding was now also growing rapidly in Western markets as consumers better understood the effects of processed food consumption and sought purer foods delivering specific wellness outcomes.

“This work will be stepping beyond milk’s known nutritive benefits to provide scientifically validated research about its effect on the brain.”

Dyer said there was also a greater understanding about products like milk delivering their benefits as a more natural whole package rather than in component parts.

With global fresh milk consumption on the slide and alternative milk proteins raucously claiming their position in supermarket chillers, he also hoped the research would provide a powerful counter to the arguments those products made about benefits.

“Most foods were not designed specifically to have an impact on human brain development and maintenance, unlike milk, which we hypothesise, does have this specific function for the infant.”

Dyer saw the work typifying a new path of research in the NZ food sector to more premium, value-added outcomes that developed high-value, specific ingredients for use across a range of products.

“It is a very exciting area for researchers to be involved in, stepping well beyond the established work on milk’s nutritional value and into this new area that sees it become a truly functional food.”

03 Jan 2018

New Fonterra division promotes health

The nutritional needs of ageing and sick people will be addressed by a new division within NZMP, the ingredients business of Fonterra.

Called the Medical Nutrition and Healthy Ageing division, it will accelerate research and development and form partnerships with innovative partners to find highly-specialised ingredients.

As people live longer, age-related diseases such as diabetes and heart disease were becoming more prevalent.

NZMP said malnutrition was not only a developing-world problem, because many people suffered from loss of appetite or gastro-intestinal disorders.

NZMP intended to deliver high-quality nutrition with products such as protein powders mixed into soups or drinks or compact yoghurts that people could swallow easily.

The quality of life for people facing or undergoing treatment for cancer could be improved with products to help them stay strong for chemotherapy.

A lack of mobility could significantly affect quality of life and protein was key to retaining and building muscle, especially with age.

Maintaining muscle mass was particularly important for bed-bound patients, facing the loss of about 1kg of muscle for every week in hospital. There was also a desire for people to extend middle age and seek out products that improved their wellbeing, such as food and drinks fortified with extra nutrients to address specific health needs and help them stay stronger for longer.

NZMP said it would draw on many years of R&D into protein products that fostered health and activity.

Population forecasting said there would be more than two billion people aged 65 and older by 2050.

Already, 27% of Japanese were in that age bracket, and 15% of New Zealanders.

28 Dec 2017

Utmost safety for new milk plant

The big, comfortable, covered catering area for the 300 contractors building the country’s newest milk factory might seem an unlikely analogy for the culture the management at Mataura Valley Milk is trying to engender.

But forget packed lunches.

Caterers provided workers building the nutritional dairy plant near Gore with barista quality coffee and cooked meals and while it was costly, Mataura Valley Milk general manager Bernard May said the message it sent about the philosophy and culture they wanted to create was far more important.

“If we want a welder to do the world’s best weld we want to ensure he feels looked after and safe.”

From the start Mataura Valley Milk has set its sights on making the world’s best paediatric and adult base nutritional powders, a complex and exacting business that required a culture of excellence among staff and quality processing systems.

That bid for excellence started with construction staff building the perfect $227 million plant, which was designed by leading experts from around the world.

May said to sell nutritional formula for $85 a can instead of $30 meant there was no room for a she’ll-be-right attitude anywhere in the company.

All the company’s eventual 65 staff had to constantly strive for excellence.

Mataura Valley Milk would be the only New Zealand plant to comply with nutritional standards set by the Ministry for Primary Industries, China’s Food and Drug Administration and the United States Food and Drug Administration.

Another layer of validation of systems and processes by an external agency had been added above that compliance to provide further quality and safety corroboration for customers.

“We are going beyond compliance to validate to customers that everything in the business is working as it should.”

May said the approach taken to product quality and risk was similar to that adopted by a pharmaceutical company.

“It’s a different approach to looking at risk and managing risk to meet consumers and customers’ requirements.”

The raw milk processing area, for example, was in its own building 120m away from the sterile nutritional production plant because contamination from raw milk was considered a significant risk.

Mataura would be supplying an established, integrated supply chain meaning it would be making sales and earning revenue from the first day of production in August.

China Animal Husbandry Group (CHG), one of 19 agricultural companies owned by the Chinese government, owned 88% of Mataura but that would dilute to the mid 70s when 35 to 40 farmer-suppliers took up shares.

Other shareholders were local investors along with Hamilton-based blending, canning and sachet business Bodco.

CHG recently increased its shareholding in Bodco and also bought a stake in Auckland nutritional manufacturer and sales company Nouriz.

It had been selling in to China for six years, supplying 5000 stores in 150 cities with 2016 sales of $300m.

That common shareholding created the integrated supply chain.

In the first few years up to 40% of production would go through Nouriz and the rest to other leading international nutritional manufacturers.

Mataura would establish its own brands and specialty products such as butter, cream and anhydrous milk fat and could produce whole and skim milk powder

The company required about 100,000,000m to 130,000,000m litres of milk a year or supply from between 35 and 40 farmers, who would be selected from within an 80km radius of the plant. Almost three times that number have expressed an interest in supplying MVM.

May said raw milk contributed between 20% and 30% of the end product with the balance ingredients sourced from around the world and blended with fresh milk. The liquid was then dried, packaged and shipped to customers.

Milk suppliers would have to adhere to strict quality standards and become shareholders in the company, paying $2 to $2.50 a share.

May said that meant not feeding palm kernel to cows, as palm oil was no longer used in formula. Milk had to be chilled below 4.4degC in accordance with USA FDA standards, meet a low somatic cell count targets and farmers would have to adhere to animal welfare and environmental standards set by organisations such as Dairy NZ and Environment Southland.

“It is a brand reputation risk we don’t want to incur.”

Eventually May said MVM wanted to establish its own farm gate milk price, but it would start at a level at least 20c a kgMS supply premium above competing prices. In addition it would be topped up with incentives of up to 10c a kg for milk quality.

Farmers would also be incentivised to produce milk on the shoulders of the season and during winter, earning from 50c to $1.50 a kg MS depending on when it was supplied. May said that reflected higher feed costs but also capital investment in standoff pads and wintering sheds.

Suppliers would be confirmed in February, the plant commissioned in June-July and production of the first milk and infant milk formula in August

May said MVM would invest in other nutritional products, but said success would be judged somewhat differently to traditional manufacturing companies.

“Success for us is not building another drier to dry more milk. It’s investing in plant capability that adds more value to milk already supplied by shareholders.”