One of NZ’s main exporters—the dairy industry—is being buffeted in its biggest market, yet this season it has a new operator, Singapore-based Olam, manufacturing milk powder at Tokoroa.
What is more, the company is paying suppliers above the price they would be getting currently from Fonterra. Its milk powder factory in which it has invested more than $100m may be the forerunner of other processing plants, with the next possibly in the South Island.
Olam, set up as Olam Food Ingredients (OFI), is majority-owned by Temasek Holdings, a conglomerate owned by the Singapore government which manages a total of $US496.59bn in assets as at December last year.
Olam learned its way around the $20bn dairy export industry as a former shareholder of Open Country Dairy, the country’s second-biggest dairy processor and exporter after the farmer-owned co-operative Fonterra. Olam has already lured one of NZ’s biggest names in the dairy industry: Colin Armer, previously a large Fonterra shareholder and a former director, has confirmed his business is among those supplying it.
Naval Sabri, dairy senior vice president of Olam Food Ingredients (Ofi), says in a deliberate strategy, China is an important, but not dominant market for Ofi. Only around 20% of its product would head there from the Tokoroa operation.
“We are very gung-ho about NZ as an important dairy origin and we will continue investing.”
The Tokoroa plant, for which Ofi is now planning a second stage to move into higher-value proteins and ingredients, received its first milk tanker recently.
Sabri declined to say how much Ofi had invested to date aside from the $100m-plus plant build.
“Numbers are still being worked out for phase two and phase three but it’s very substantial”.
He told the NZ Herald Ofi “and most of the industry” was not surprised by the downturn in milk prices. It had become obvious once an expected return of demand from China in the second quarter of the year when it came out of Covid lockdown did not happen. Market observers had also spotted an increase in China’s domestic milk production.
“At that time the expected slowness of demand was for at least the next two quarters. We adjusted our business model to be prepared for that eventuality.
“For me it was surprising that Fonterra took so much time to communicate to their farmers that there is an issue in the market and that the milk price was way too high to support that.
“We have great support from the farming community. Waikato is the biggest milk producer and there is competition for milk, but it is who can offer the best value for milk sourced from the farmer. As long as we are able to do that I am confident we will be able to source as much milk as we need.
“There was a lot of doubt we would get any milk for the plant but (as at) today we have secured a large part of the milk required, and if you add what is contracted for next season, we have virtually what is needed for the next investment.
“We are very gung-ho about NZ as an important dairy origin and we will continue investing.”
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
Olam learned its way around the $20bn dairy export industry as a former shareholder of Open Country Dairy, the country’s second-biggest dairy processor and exporter after the farmer-owned co-operative Fonterra. Olam has already lured one of NZ’s biggest names in the dairy industry: Colin Armer, previously a large Fonterra shareholder and a former director, has confirmed his business is among those supplying it.
Naval Sabri, dairy senior vice president of Olam Food Ingredients (Ofi), says in a deliberate strategy, China is an important, but not dominant market for Ofi. Only around 20% of its product would head there from the Tokoroa operation.
“We are very gung-ho about NZ as an important dairy origin and we will continue investing.”
The Tokoroa plant, for which Ofi is now planning a second stage to move into higher-value proteins and ingredients, received its first milk tanker recently.
Sabri declined to say how much Ofi had invested to date aside from the $100m-plus plant build.
“Numbers are still being worked out for phase two and phase three but it’s very substantial”.
He told the NZ Herald Ofi “and most of the industry” was not surprised by the downturn in milk prices. It had become obvious once an expected return of demand from China in the second quarter of the year when it came out of Covid lockdown did not happen. Market observers had also spotted an increase in China’s domestic milk production.
“At that time the expected slowness of demand was for at least the next two quarters. We adjusted our business model to be prepared for that eventuality.
“For me it was surprising that Fonterra took so much time to communicate to their farmers that there is an issue in the market and that the milk price was way too high to support that.
“We have great support from the farming community. Waikato is the biggest milk producer and there is competition for milk, but it is who can offer the best value for milk sourced from the farmer. As long as we are able to do that I am confident we will be able to source as much milk as we need.
“There was a lot of doubt we would get any milk for the plant but (as at) today we have secured a large part of the milk required, and if you add what is contracted for next season, we have virtually what is needed for the next investment.
“We are very gung-ho about NZ as an important dairy origin and we will continue investing.”
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
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