The two remaining millers, Champion and Weston, are subsidiaries of multinational food giants. They've bought, closed, or simply out-competed every other miller in New Zealand such that they're the last two standing. They'll defend their turf with cut-throat prices to customers and attractive premiums to suppliers.
Both millers, through parent companies, have in-house customers, meaning a proportion of their market for flour or by-products is secure. If the Farmers Mill, as the new venture is being called, hasn't done the same by signing a cornerstone customer – possibly as a joint-venture partner – then it's going to find the going tough.
But looking at the shareholders and directors of Grainstor, the storage company that's spawned Farmers Mill, it's a fair bet they've got their ducks lined up. Among them are some of the South Island's largest cropping farmers, several with substantial interests in other farming sectors. At least one has a proven track record in developing a paddock-to-plate business, albeit in potatoes, and Grainstor chairman Murray Turley has some experience of mill ownership, through the Temuka flour mill, before it was sold to baker Couplands, which closed the plant about 2001.
The challenge with marketing flour is, unlike potato crisps, generally it doesn't take you to the plate: it's a food ingredient for further processors. Milling is a notoriously competitive, low margin business in which manufacturing efficiency has been king. Yes, there may be increased demand today for locally grown ingredients, and more opportunity to differentiate with provenance and quality, but with at least one extra step in the supply chain, it is harder to sheet home added value to the farm.
On the supply side, procurement is unlikely to be a problem. Between them, Grainstor shareholders still grow a huge heap of wheat, even though some are now big dairy farmers too. Meanwhile there are plenty of other growers who've had enough of the overseas-owned mills' domination of the market and the pay-just-enough contract policies. Even if Farmers Mill's contracts are out of the money by a few dollars in comparison to the incumbents' newly jacked-up premiums, they'll likely back the local operator. The competition for grain could raise bids for other crops too.
