Fat worth more than you think

Kiwi dairy farmers will earn more from milkfat than protein this season, a change DairyNZ says is the most significant to hit the global dairy industry in 20 years.

‘‘Fat has been a low-value milk component but has seen a steady rise in recent seasons due to consumer-driven market value,’’ strategy and investment leader Bruce Thorrold said.

‘‘That’s a welcome change for New Zealand dairy farmers who are set to receive a strong 2018/19 milk price, buoyed by the value of milkfat.’’

In response to growing international demand for high-fat dairy products, Fonterra announced last year it would build a $150 million cream cheese plant in Darfield, Canterbury.

The factory is expected to turn out 24,000 kilograms annually.

The co-op’s Edgecumbe factory has also increased its butter sheet production from 4500 metric tonnes to 7000 metric tonnes to keep up with demand from Chinese pastry chefs.

Fonterra last month announced a forecast farmgate milk price of $6.75 per kilogram of milksolids for the year to September 2019, 25c/kgMS lower than the previous forecast but still high historically.

Milk price and the relative value of fat and protein are the biggest factors in the breeding worth (BW) of dairy cattle and the changes in fat price had produced large shifts in BW both between and within breeds, Thorrold said.

‘‘Of the top 200 bulls by BW in 2019 (BW2019), 70 per cent are jersey, 5 per cent holstein-friesian and 25 per cent crossbred [jersey and holstein-friesian],’’ he said.

The economic values for fat and protein are calculated by splitting the milksolids price into a value for fat and protein, and then accounting for production costs.

The gap between fat and protein values has been closing over the past three seasons and that trend is forecast to continue.

‘‘Fat has been a lowvalue milk component but has seen a steady rise in recent seasons due to consumer-driven market value.’’ Bruce Thorrold