Despite high fat prices it is now more profitable for Fonterra to make whole milk powder than butter and skim milk powder, co-op chairman John Wilson says.
“There is nothing wrong with A1 milk, never has been, never will be based on all the science we have seen,” says Wilson.
“If you go back to the decisions our predecessors made on A1 versus A2 – to simplify it right down – the science hasn’t changed. We have seen numerous studies but we haven’t seen conclusive evidence anywhere or a case made that A2 milk is better than A1 milk.
“Trials with some people with more sensitive stomachs show they may benefi from A2 over A1 milk, but the science is inconclusive.
“We have seen an absolute change in global dairy markets where consumers and consumer preferences change very quickly; they can be influenced by non-science claims…. and by opinion leaders, for example.
“That reflects the good job A2 has done in positioning their brand. We have decided after discussion to go into a licence and or a royalty arrangement with A2 with some products in some markets.”
Fonterra management is analysing where demand will be in those markets and the products on which it has come to an agreement with A2.
“When we have come to a view on where demand should be, then we will go to farmers alongside those plants where we believe we can most efficiently produce whatever that product is.
“And then we will price that milk accordingly.
“But the whole idea is the benefits will flow also across the whole cooperative.”
Wilson believes farmers should continue making breeding decisions based on the genetics that will give them the most overall gain across their business.
He personally won’t be selecting A2 over A1 because of all the science he sees.
“There is no less demand for A1 milk; what we are seeing in some markets is a niche opportunity for A2. Farmers need to make their own decisions and we will let farmers know, as soon as we have market demand-driven information, in certain pockets around the countryside.”