Mataura Valley Milk is fast approaching the first tanker to line up at its new site to unload the milk for processing.
With competitors Fonterra and Open Country Dairy already operating in the south, the new kid on the block wants to offer something different. Southland only owns eight percent of the national dairy herd and questions have arisen as to whether there is enough production to fill a third dairy site in the region.
However, Mataura Valley Milk CEO Bernard May says they are doing something completely different from other dairy companies.
The plant, which is under construction in McNab, near Gore, will begin processing infant formula for the Chinese market in August.
* Mataura Valley Milk is expected to start milking next year
* Work begins on the Mataura Valley Milk dairy plant
* Chinese company majority investor in a dairy plant in Southland of 200 million dollars
“This is a completely different business from a dairy business in that we will be making highly functional and high value products to order.
“As suppliers, they will be an integral part of the supply chain and share the benefits of a company operating in the premium and super premium nutritional markets.”
May argues that the introduction of the Mataura Valley is a positive and necessary addition to the dairy industry, as the sustainability of dairy farming is eroded by the income from basic milk.
Conversely, Waikato, which accounts for about 27 percent of national milk production, has 13 dairy processing sites, excluding the processing of sheep and goat milk.
With tighter restrictions on resource clearing and low returns on milk prices, dairy conversions have slowed in Southland over the past three years. Admittedly, not all farms approved for dairy conversion have been converted, with some farmers trying to ensure possible future development on their farm.
The consensus, however, appears to be that there will be few newly licensed dairy farms operating in the Southland in the next few years. So, for Fonterra Head of Farm Source Southland and Otago Mark Robinson, the question arises as to whether there is capacity in Southland to have all the factories filled.
Fonterra previously supplied milk under the Dairy Industry Restructuring Act (DIRA) to Open Country when it built a factory in Awarua in Southland.
Robinson says the co-op welcomes competition in the dairy industry, but the concern comes as to whether a new plant would reduce the value of other plants by reducing the supply of milk.
“The active ingredients on the ground become less efficient if this milk is distributed among several factories. Our farmers have invested heavily in the region. The farmers mainly invested in this factory. [Edendale]. From the point of view of our farmers, they want this plant to be as efficient as possible. “
Open Country President Laurie Margrain said the company is not afraid of competition.
“I think there is no doubt that competition is essential to have an efficient and productive industry.”
May believes that while the number of dairy farm conversions has slowed and the milk supply should be fairly static, there is enough milk for everyone and enough high quality milk in the Southland to meet the needs. of Mataura Valley. The newcomer will need around 500,000 liters of whole milk per day to make nutritional products.
“With static supply forecasting, higher value returns become essential,” he says.
“We are confident that we are meeting the needs of our own suppliers – we are looking for around 30 high quality Southland dairy farms to join the Mataura Valley Milk team and we are seeing significant interest from farmers wanting to be part of it. ‘a high value, integrated supply chain from farm to market, an opportunity that has not been offered by anyone else in the region. “
However, May knows being the new neighborhood business isn’t easy.
“We know we have to compete for milk and we are prepared to pay our shareholders / suppliers a very competitive farm gate price, as well as bonuses and incentives for best farm practices and environmental stewardship.
Specific requirements are being developed for suppliers in the Mataura Valley, including the elimination of palm kernel extract (PKE) as a complementary feed for dairy cows.
May said consumers were at the forefront of the decision, with buyers wanting palm oil removed from their formula.
“We need to bring the supply chain from farm to consumer. We have to be able to sell the product to consumers.
Mataura Valley Milk announced that the project was moving forward in 2016, after a cash injection of $ 200 million by the China Animal Husbandry Group (CAHG), a Chinese state-owned company.
CAHG has a 71.8 percent stake in the site, of which 20 percent is owned by agricultural suppliers in Southland and the remainder by milk powder company BODCO and the directors of Mataura.
Mataura Valley Milk will be the brand of its products, despite the involvement of BODCO.
May says the China Animal Husbandry Group recognizes the growing demand in China and around the world for high-quality, highly nutritious protein foods.
“CAHG’s investment strategy recognizes the importance of food safety throughout the supply chain and that is why they invest in sourcing, processing, canning, distribution and sale. milk – an integrated supply chain where every step of the process can be traced. CAHG’s vision is to produce exceptional nutrition for a growing world, ”he says.
The international infant formula market is expected to grow by 10% over the next five years.
“The Chinese market is important and sustainable for us, but our strategy is multidimensional in terms of products, sales and markets, the latter including South East Asia, Africa and Australasia.
It is hoped that the new venture will boost the economy not only of Gore, but of the rest of the region.
The $ 240 million investment is expected to inject around $ 90 million into the local economy each year – millions having already been invested in the south during construction of the plant and planning of the business.
“These are tangible benefits that are supporting many businesses in Gore, the Southland and beyond, and the project has instilled confidence in the local real estate and retail market,” said May.
Federated Farmers Southland President Allan Baird said the new site will bring economic value to the district, including through new employment and transportation opportunities, but there will be a few roadblocks along the way.
“In the short term, I think there will be plants that are not fully utilized. I think Fonterra will be hit harder than the others.”
Overall, the Southland dairy industry has continued to diversify since the dairy boom, and Mataura Valley Milk is only the latest edition.
May is confident the business will be a positive addition to the southern dairy landscape.
“Our milk supply needs are different from those of a basic dairy producer, which relies on high volume and high turnover. We believe our high value, integrated supply chain model is ideally situated for success in New Zealand. “