Fonterra restructures organics arm

Fonterra plans to halve the number of organic dairy farmers it has to try and made a loss-making side of its business break-even.

The co-op has responded to a downturn in the global economics market by announcing a restructure of its organics operation, which a spokesman said should cut the number of its organic suppliers back to about 50. It presently has about 100.

The co-op is meeting with its organic farmers today to run them through a four-point plan designed to rationalise ithat part of its business.

As part of the plan, it will concentrate its North Island organic suppliers around Hautapu, its key certified organic site, while at the same time reducing the amount of product processed at its other two certified sites, Waitoa and Morrinsville.

It will also prioritise its organic product range to focus on cheese, which provides the best returns, and focus on the markets with the best returns and potential – Asia and Australasia.

Fonterra’s group director supplier and external relations, Kelvin Wickham, said the first two parts of the plan will mean considerable transport and manufacturing cost savings.

He said the organics market was hit hard by the global financial crisis and market indications are it will not recover to previous levels.

“All categories felt the effects but particularly the category in which we sell – packaged dairy foods – where prices and volumes are still below 2008 levels.

“Research shows people are now less willing to pay the premium for organic products. In addition, consumers are gaining more confidence that everyday products are being produced more sustainably and are more acceptable, so they no longer see the need to pay the premium for most organic products.”

All of Fonterra's organic contracts would be honoured through to their formal termination dates, Mr Wickham said.

The Green Party has hit out at Fonterra's plans, saying the move to confine its take of organic milk to the Waikato and Bay of Plenty will cripple New Zealand’s organic dairy sector.

“Organic dairy is the future of dairy in New Zealand and Fonterra are actively putting off this transition,” Green Party agriculture spokesperson Kevin Hague said.

“Organics give New Zealand dairy a competitive advantage for value-added products. Fonterra should be supporting farmers who have, and who wish to, convert to organic farming." 

Mr Hague said that given the poor state of our waterways, conversion to organic farming is an easy way to cut nitrate pollution.