Some organic dairy farmers have contracts renewed

Fonterra is renewing contracts for some of its organic dairy farmers, less than two years after slashing the number of supplier farmers throughout the North Island, but the news is not so good for Northland suppliers.

In August 2011, Fonterra halved the number of organic suppliers in the North Island because of financial losses in the organics market.

In a statement yesterday, Fonterra nutrition managing director Sarah Kennedy said the co-operative had worked hard during the past 18 months to return its organics business to profitability.

It had restructured the business to focus on markets in Asia while also reducing costs to ensure ongoing profitability.

Transport costs had been reduced by concentrating organic milk supply in the central and lower North Island, while the co-operative's focus on Asia had also paid off with higher premiums for organic ingredients and increasing demand, mostly out of China.

Based on that turnaround, Fonterra was now able to renew contracts for farmers in the middle and lower North Island who had contracts expiring this year.

The remainder of its organic suppliers in those regions had between one and two years left in their existing contracts.

The co-operative was conducting a ''thorough'' review to ensure it had the right business model to cope with volatile markets and would come back to farmers early next year, she said.

It was concentrating organic milk supply in the middle and lower North Island, which meant Northland suppliers would not have their contracts renewed.

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