Fonterra expanding capacity

Fonterra's Edendale site, which will undergo major expansion. Photo by Peter McIntosh.
Fonterra's Edendale site, which will undergo major expansion. Photo by Peter McIntosh.
Fonterra will spend about $157 million installing three new plants at its Edendale site as part of a more than half-billion-dollar upgrade of processing capacity.

The upgrade, which includes a $400 million drier at the Lichfield site in south Waikato, was part of a trio of significant announcements by the dairy giant yesterday.

Fonterra is also forming a global partnership with Chinese infant food manufacturer Beingmate to help meet China's growing demand for infant formula.

Chief executive Theo Spierings described the partnership as a ''game changer'' that would provide a direct line into a market that was the ''biggest growth story in paediatric nutrition in the world''.

That market was worth about $NZ18 billion and was expected to be worth $33 billion by 2017.

Fonterra would soon start the process to issue a partial tender offer to gain up to a 20% stake in Beingmate.

Its investment in the partnership would be $615 million.

After gaining regulatory approvals, the two companies would set up a joint venture to purchase Fonterra's Darnum plant in Victoria, Australia, and establish distribution to sell Fonterra's Anmum brand in China.

China was Fonterra's ''number one market''and it wanted to be part of the growth in China, Mr Spierings told a media conference, via link from Beijing.

Beingmate ''was a very, very strong'' Chinese infant nutrition player, with 7000 employees and big factories ''all across the country''.

Meanwhile, Fonterra's investment in New Zealand would not only expand its processing capacity but allow for more flexibility to better optimise production, Mr Spierings said.

Last year, the co-operative encountered what it described as an ''extraordinary situation'', with the disparity between very high milk powder prices, and those for cheese and casein.

The co-operative devoted the maximum possible volume of milk to whole milk and skim milk powder streams, but was limited by its production facilities, and the remaining milk was converted to cheese and casein, which were generating lower returns.

''Our strategy is to increase earnings by driving more milk volume into higher value categories globally by turning the wheel from commodities to higher-margin products,'' Mr Spierings said.

At Edendale, the three new plants comprise a milk protein concentrate plant, which will separate protein from skim milk and turn it into protein powder; a reverse osmosis plant that will increase capacity on an existing drier by 300,000 litres a day; and an anhydrous milk fat plant capable of processing 550,000 litres of milk into cream per day.

The development, once completed, will create 25 more roles at the site, which is Fonterra's oldest operating manufacturing site.

The new drier at Lichfield, a $400 million investment, will be capable of processing up to 4.4 million litres a day and it will mean an additional 50 full-time jobs.

Chairman John Wilson said the investment was about giving more flexibility to be able to maximise the value from Fonterra farmers' milk.

Coupled with a $235 million development under way at its Pahiatua site to develop a third drier, and investment over the last six months in the existing asset footprint, it meant about 10% more capacity across the peak, Mr Wilson said.

As I said ...

I know exactly how much environmental improvements cost, don't worry about that ... and it's generally a fraction of land/total infrastructure costs.

Check your LAWA website and your facts. The only areas in which indicators are worsening in Dunedin's streams over the last 9 years  are levels of e-coli - which comes from animal poop - and dissolved reactive phosphorous - which generally comes from agriculture. There are farms in the headwaters of Dunedin's streams so changes in agricultural practices could have been the source. It does, however, need to be properly investigated before pointing fingers.

The biggest problem with non-compliance is that it financially hurts the good, honest and compliant farmers (the vast majority of farmers) who manage their land well and pay the price for it. I don't want them to be outcompeted by those that don't give a toss.


As I said...

@Rob Fischer: Don't draw that bow too long...  As I said, improvements being made. It took a long time to happen - leaching for example - and it will also take a long time to fix. At least farmers have recently had the means to make the improvements which is not always the case. You can't criticise the waterway fencing or effluent management. That stuff isn't cheap or just on paper as you seem to infer. Whether it was the individual farmers or one or more of the farmer owned co-ops that made the change the fact is the industry drove it. This is the first year without prosecution in Canterbury under either National or Labour which proves compliance is improving. Meanwhile, the streams running through Dunedin are filthy which has nothing to do with agriculture and rate payers will now be forced to foot the bill for that cleanup which they can add to stadium and council car fleet costs. See the LAWA website for some facts.

Clean up?

You must mean the voluntary means such as Enviro Walk sv3nn0. A sheet with a series of tick boxes on good environmental management that the majority of farmers already know and the rest don't really care about. DairyNZ counted uptake as when a farmer received the check list ... never checked how many were actually bothering to do it. They are cleaning up ... but it's a very slow process.

The achievements of the Dairying and Clean Streams accord also look great (see the final report >>Link<<). 99% of farmers now have regular race crossing points. But then you read back to find that the target they set themselves was 90% and even when the accord was established in 2003 they had already exceeded it (it was 92%)!

The exclusion rate from streams is also impressive at 87%. Genuine improvements have been made here. However, streams of less than a meter, lower than ankle deep and not permanently flowing are excluded. So in some areas this measure is unlikely to have had much impact. It's fair enough they were excluded, but shows the importance of careful management across the farm rather than just around the streams.

The number of farms with a nutrient budget is again impressive at 99% ... except when you realise that fertilizer companies took over monitoring responsibilities in 2006/07 .. at which point the figure mysteriously jumped from 33% compliance to 97% compliance.

The best one however is individual compliance with environmental regulations which from 67% in 2003/04 jumped a massive 6% after almost 10 years of voluntary measures to 73% in 2011/12. With larger farm sizes and no way of knowing which farms are non-compliant and by how much, the actual area of land non-compliant or the impact of non-compliance could be even greater now - despite higher compliance levels.

The lack of prosecutions could be due to any number of factors ... most likely 6 years of National governemnt. 



The dairy industry started the clean up several years ago. Over 40,000km of waterways fenced and effluent ponds on all farms. Regular audits, inspections and surveillance with hefty punishments has seen full compliance in 70% of Canterbury (for example) farms with abatement or infringement notices to the other 30%. The really good news is that no prosecutions were required this year which is the first year. Farmers are definitely picking up their game and paying for the clean up and also the prevention. The next step is starting to cause some pains in urban areas with councils also required to maintain water standards from storm water which is already hitting rate payers and will only get worse.

What cost to us all?

They are the ones who should pay for the cleaning up of the waterways their "collective" read multinational monster have done to much environmental damage to this country without any consequence for to long.

Show me the money

So much investment in NZ - this is great news! At some point the money will have to start trickling down, or maybe even torrents will flow, seeing that it has pooled at the top for so long. After all, we are producing and selling more dairy than ever, so perhaps it is time all New Zealanders start to reap some of the benefits, like being able to upgrade hospitals, keep physio pools, housing, jobs etc...

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