There is also a fight over milk in New Zealand

Milk production in New Zealand is reaching environmental limits and there is also an aging population. The shrinking environmental space is a particular concern for processors. Last year, the government expressed the ambition to have a CO2050-neutral economy by 2. At this point the problem is, because about half of the emissions come from agriculture, especially dairy farming. This means that livestock numbers are likely to be scaled down, possibly even by 15%, according to rumors going around.

Dairy cooperative Fonterra, which processes almost 80% of the milk supply, even assumes a decline of 20% among its own members. For this reason, Fonterra recently adjusted its capital structure, making it easy for dairy farmers to become members. Perhaps a bigger challenge is retaining members.

Olam 
The large food conglomerate Olam International is attracting dairy farmers from the cooperative. Headquartered in Singapore, this company has a large processing site in the Waikato region. This is on the North Island, where Fonterra has many members. Olam is working on the second phase of the construction of a milk powder factory there, which should be operational by the end of this year. To ensure the supply of raw materials, they are lobbying hard for milk in the New Zealand farmlands.

Dairy farmers are presented with a sausage. The so-called high-quality protein ingredients that Olam will produce there would yield a better milk price than whole milk powder, which Fonterra is major in. Potential suppliers can benefit from this. Olam claims that there is a lot of interest from dairy farmers to switch. It is not known exactly how much milk they are looking for. The factory will be built on a site of over 10 hectares and the investment amount will be in the tens of millions of dollars.

Westland Milk
In addition to Olam, Westland Milk – part of the Chinese Yili since 2019 – is also investing in additional stainless steel in New Zealand for the production of Lactoferrin. Westland is also looking for extra milk. Together with three other processors, they wrote a manifesto to the New Zealand government last year. The accusation was that Fonterra would be favored by giving permission for the adjustment of the cooperative's capital structure. This would further increase Fonterra's market power, while they are already dominant.

Trend break
Although long-term forecasts hint at lower milk production in New Zealand, supply has recently returned to growth figures. In April, the supply again exceeded last year's level and this is also visible in May. With a production of 978.000 tons, supply was almost 8% ahead of last year. However, there is currently a seasonal decline that will probably pick up again from July.