Westland trumps its big brother

Media Release

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1 October 2013

Westland trumps its big brother

New Zealand’s second largest dairy cooperative, Westland Milk Products, has managed to beat Fonterra Cooperative Group with $6.34 per kilogram of milk solids (kg/MS) payout before retentions.

“That 2012/13 season must rank as one of the weirdest we’ve had here on the Coast,” says Richard Reynolds, Federated Farmers West Coast Dairy chairperson.

“After a promising start, we had a summer flood which washed out bridges before a drought so severe some sections of our rivers like the Taramakau actually dried up.

“Despite all of this, Westland deserves credit for managing to make a surplus of $6.34 kg/MS.  That compares to Fonterra’s $6.30 kg/MS before retentions.

“The difference in the final payout is due to Fonterra retaining 14 cents kg/MS while Westland retained 30 cents kg/MS.  We are comfortable with what Westland is retaining despite it leaving us with slightly less cash in the hand at $6.04 kg/MS.

“Retentions are vital to grow our cooperative and while we may benchmark ourselves to Fonterra, we must not fall into the trap of trying to go toe-to-toe with them.

“We need to do our own thing and this works, as shown by Tatua’s impressive results announced yesterday and from how well our subsidiary is doing. That is where the greater level of retentions will go to: building the ingredients and value-add aspects of our business.

“Of course the dollar isn’t giving us much relief but there is precious little we can do about that until the United States and other countries stop the printing presses.

“Certainly, having more consistent returns to cooperative members would help our business planning than the more volatile milkpowder.  That said, higher current returns for milkpowder may deliver us a forecast payout of $7.60 - $8.00 per kg/MS for this current season.

“Yet speaking about what we may end up getting paid this time next year seems like the America’s Cup. We’ve got one hand on the payout but you still need to go out and win and in our case, that means farming through spring, summer and autumn.

“We are not counting our chickens just yet but if the forecast payout sticks the banks will be keen for us to reduce debt built up over the drought.  After all, total agricultural debt was sitting at $51.7 billion in August, which was up more than $2 billion when compared to August 2012.

“Aside from cutting debt we need to invest in environmental works on-farm with nutrient management increasingly important.  As the experts are telling us drought won’t be a one-off, we may need to look into irrigation systems.  Generators are becoming increasingly important too.

“While the DIRA clock is ticking for the milk we buy in at the shoulders of the season our dependency is declining.  It is something we feel the coop has in-hand.

“From Federated Farmers perspective this is a pretty good result as we look forward to a better 2013/14 season and a better coop, weather dependent that is,” Mr Reynolds concluded.

ENDS

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