Oceania Dairy signs first milk supply agreement

Oceania Dairy has signed the first milk supply agreement for its $214 million dairy factory in Glenavy.

The agreement was signed with large-scale local dairy farmers Aad and Wilma van Leeuwen, representing a group of foundation suppliers covering 20 individual dairy farms.

The plant is being built for Chinese company Inner Mongolia Yili Industrial Group and is on target for completion in time to take milk in August next year.

Oceania Dairy will contract up to 40 local farmers for the 2014-15 supply season to deliver 130 million litres of milk.

Once it moved to full production capacity by 2016-17, it would process 300 million litres a year, producing 47,000 tonnes of milk powder for export to China to be used in infant formula.

The company offered local farmers choice and opportunity and was a ''real shot in the arm'' for the local economy, Mr van Leeuwen said.

The latest factory update said Oceania Dairy had 11 staff, with the number expected to ''ramp up rapidly'' in the new year.

Mid Canterbury milk processor Synlait Milk says it is expecting to outperform financial targets on the basis of a ''favourable product mix''.

International dairy commodity price differentials were larger than usual and continued to favour Synlait's milk powder and anhydrous milk fat-dominant product mix, chief executive John Penno said.

While it was still early in the season, recent announcements also made it clear that the current season's milk price was likely to be less than the company had expected, Dr Penno said.

Earlier this week, Fonterra announced it was leaving its forecast milk price unchanged at $8.30 and slashing its dividend by 22c.

The board attributed its decision to the disparity between very high milk powder prices and those for cheese and casein.

Although it had devoted the maximum possible volume of milk to milk powder streams this season, it had not been able to lift production above the present 70% level as it was limited by its production facilities.


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