Cream of the crop – Fonterra named best in the world Allan Swann
An international industry research group has ranked Fonterra the number one milk processor in the world. International Farm Comparison Network (IFCN) benchmarked 600 milk processors in over 70 countries and placed Fonterra’s total annual volume of milk processed ahead of industry heavyweights such as Dairy Farmers of America, Nestlé, and Dutch co-operative FrieslandCampina. The IFCN is a network of dairy researchers from 80 countries, 60 dairy companies and other institutions and farmers. It analyses global dairy trends and create knowledge to guide the various stakeholders in the dairy sector.
Fonterra CEO Andrew Ferrier said the ranking reflected the global reach and scale of the company’s business, with its New Zealand milk supply and manufacturing operations at the core. “With 80 % of our milk supply coming from our 10,500 New Zealand farmer-shareholders and processed into over 2 million tonnes of export product every year, our local operations, which employ about 10,000 of our staff, are the cornerstone of our global business,’ he says. Mr Ferrier says that around 20 % of Fonterra’s milk was sourced globally, from ventures such as Soprole in Chile, and its volume has grown as it extends its supply arrangements with customers around the world. The goal is to ensure a year round security of supply to solidify these arrangements, he says.
While Fonterra produces more milk than anyone else, it still only accounts for 2.7% of the total world milk market. This year’s production was up 7.5% to 1,281 million kgMS compared to last year’s drought stricken season of 1,192 million kgMS. The 2007 year was at 1,246 million by comparison.
The announcement is a small bit of good news in an otherwise dour year for Fonterra. Farmers are already hurting from increased input costs and a lowered payout price of $4.55kgMS, down from last years $7.90 ($7.66kgms after retentions); falling land values and elevated debt levels have crunched available cash. Fonterra also announced a drop in its Fair Value Share price to $4.52, down $1.05 on last year’s price of $5.57 – a loss in value of around $1 billion for the co-operative.
Fonterra has been plagued by problems in the last year, including a disastrous joint venture in China with the now-defunct Sanlu, a collapse in commodity prices and a mountain of product it could not sell, leaving it with a mountain of debt and low working capital. It now has to deal with a wave of neo-protectionism from the US and EU, wrecking international dairy prices.
