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June 2013
INSIDE Westland siphons cream off Canterbury milk Page 6
A warm welcome in the Mackenzie Country
Page 8
Canterbury merino judged world’s finest
Page 36–41
FARM VEHICLES & MACHINERY
CONTACT US Canterbury Farming 03 347 2314
by Hugh de lacy
Buoyed by an entry price one fifth that of multi-national Fonterra’s, dairy co-operative Westland Milk Products is pausing for breath after gobbling up enough milk from Canterbury to supply up to 20% of what it needs to run its Hokitika factory year-round. At least 35 central Canterbury milk producers have signed up with Westland, achieving the target set in Westland’s four-year-old strategic plan to grow the Hokitika-based business by bringing milk “over the hill” from Canterbury.
and that it expects to find ready takers especially among dairy farms being developed on newly-irrigated land.
It’s the first time in the history of the West Coast, whose economy has been almost entirely dependent on mineral extraction, that a substantial and growing quantity of raw materials of any sort has moved westward across the Southern Alps — by rail — for processing, then back again for export through Lyttelton.
“We’ve got to a point where we’re not chasing milk in Canterbury, and we’ll have a think about the next investment to make sure we continue to process the milk that’s available.”
Canterbury farmers on irrigated land now comprise between 15% and 20% of Westland Milk’s supply base, which not only kept the factory running through this year’s late-summer drought on the normally summer-safe West Coast, but will ensure it can now run year-round for the first time. And while the company is pausing in its pursuit of new suppliers to digest its recent gains, chief executive Rod Quin made it clear that it has its sights set on soaking up more of Canterbury’s milk supply,
“We’ve got to our target (for Canterbury suppliers) reasonably quickly, and it’s been a really positive uptake,” Quin told Canterbury Farming.
Though only 35 in number compared to the 400 West Coast members of the Westland co-op, Canterbury suppliers represent a disproportionately large slice of the company’s supply, because the average size of the Canterbury dairy herd is around 750 cows, while West Coast herds average 380. As part of its strategic plan to move out of commodities and into the nutritionals market, Westland recently installed a baby formula plant at Hokitika, with a view especially to the burgeoning Chinese market. Westland is now sourcing from Canterbury all-yearround, something which, following a revamp of the Hokitika plant’s maintenance
programme, has allowed the year-round supply option to be offered to West Coast farmers.
fleet of three road-tankers, with the concentrate being railed to Hokitika.
The company needs between 100,000 and 150,000 litres of milk a day to make the year-round operation economic.
More significantly the company has already obtained resource consent for an expanded plant at Rolleston, though it has no plans to build there yet.
Quin said “only a handful” of West Coast farmers had decided to supply year-round, committing between 40,000 and 60,000 litres a day, but that was as expected because of the option’s late announcement. Canterbury would underwrite the daily need, and developing the company’s investments on the eastern side of the Alps was central to its continued growth, he said. Westland already has a reverse osmosis de-watering plant at Rolleston, south of Christchurch, which halves the bulk of the milk collected by a
“It’s just one of the options that we’ve got, but we wanted to get the resource consent in place because the process of getting it at the time you want it is always a bit of an unknown,” Quin said. Westland is an attractive start-up option to Canterbury farmers wanting to buy into a co-operative supply agreement, which in both Westland’s and giant Fonterra’s case is based on buying one share per kilogram of milk solids to be supplied. Westland’s share price is $1.50, while Fonterra’s, fixed
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by daily trading, currently ranges between $7.50 and $8. In terms of payment to farmers for each kilogram of milk solids, however, Westland continues to be right up there with Fonterra, forecasting $6.60 to $7 for the coming season compared with Fonterra’s $7 firm. Quin said that while the relatively low cost of buying in to Westland was attractive to farmers, it was not the only thing the company had to offer. “A lot of shareholders have joined because they like to be part of a smaller co-op, they feel that they have ownership, they understand the strategy, and being able to talk to directors and the senior management team easily is a big part of it. “But the differential share price is clearly another point of difference,” Quin said.