Organic dairy product prices have proved too rich for overseas consumers, forcing Fonterra to downsize its organic milk-processing operation and leaving about 50 North Island farmers with no market.
The dairy giant has announced that in order to bring its loss-making organic business to break-even point, it plans to halve its milk collection, concentrating processing at its Hautapu certified processing site in Waikato, and reducing processing at its Waitoa and Morrinsville sites.
It blamed the global financial crisis for slowing the growth of the organic dairy business.
There are more than 100 organic dairy farms in the North Island.
Most organic milk was supplied by Waikato farmers, with a big contribution from the Bay of Plenty, Fonterra general manager, milk supply, Steve Murphy said.
The decision means organic milk producers in the lower North Island will no longer receive premiums on top of regular milk payouts of between 45c and $1.05 per kilogram of supplied milk solids, depending on the farmer’s organic certification level.
However, many of the affected farmers were on contracts for up to five years, which Fonterra said would be honoured.
Most organic milk supplied to Fonterra went into export product, Murphy said.
He did not know of any other organic milk buyer.
New Zealand’s second biggest milk processor, Open Country Dairy, said it would not see farmers "left out in the cold".
Chairman Laurie Margrain said wherever it could, it would take milk. However, because it was not geared for organic processing or distribution, it could not pay a premium.
The affected farmers’ milk would be treated like regular milk, he said.
Open Country has processing plants in Whanganui, Waikato and Southland.
New processor Miraka, which is based at Mokai, near Taupo, also said it would not rule out buying some milk.
However, industry insiders said it would be difficult for these independent processors to help because the farmers were so scattered and transport costs would be prohibitive.
Fonterra had cited substantial transport costs as a factor in its decision.
Federated Farmers dairy chairman Willy Leferink said the announcement was "a bolt from the blue" and the organisation was working to help affected farmers.
http://www.stuff.co.nz/business/farming/5488723/Milk-premium-runs-dry-for-organic-dairy-farms?
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