Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
For the fifth year running the co-op, with 114 suppliers, has beaten the other processors including Fonterra.
Tatua’s payout is nearly $2 above Fonterra’s 2014-15 payout announced in May. Tatua is also expected to comfortably beat Open Country Dairy, tipped to pay its suppliers around $4.91/kgMS.
Last month, Westland forecast $4.80-$4.90 as its final payout for last season.
Tatua has also announced an opening forecast of $6/kgMS for this season.
Unlike the other processors, Tatua does not trade in whole milk and skim milk powders, butter and cheese. Its base products include caseinates, anhydrous milk fat and whey protein caseinate.
Tatua chief executive Paul McGilvary says Tatua’s product mix enjoyed better returns last year. But he points out this has not always been the case. “There have been times when milk powder fetched better prices than our products,” he told Dairy News.
He says the bulk of Tatua’s products are in specialised value added categories – aerosol creams, bio-nutrients and speciality nutritionals; it uses milk as a raw ingredient. “Lower milk prices mean higher margins for our specialised products,” he says.
McGilvary says the $6/kgMS opening forecast is “not that great” but acknowledges it is much better than the other processors. “With DairyNZ putting the average cost of production at $5.70/kgMS, there isn’t much left for our shareholders.”
Tatua processed 15.6 million kgMS from its suppliers last season; it’s forecasting 15.2m kgMS this season. – Sudesh Kissun
