Dairy group moves from Fonterra
Ex-All Black captain Graham Mourie is one of the principals behind dairy farm fund Southern Pastures, which has signed a deal with Westland Milk Products to make it the largest shareholder in the West Coast co-operative.
Southern Pastures will supply Westland with four million kilograms of milksolids a year. At $1.50 a share, the deal will cost Southern Pastures $6 million.
Executive chairman Prem Maan said the agreement would take effect from the beginning of the 2018-2019 season, with its nine Canterbury dairy farms supplying Westland. Formerly their milk went to Fonterra.
Westland has also announced a drop in its farmgate payout prediction for 2017-18, down to a range of $6.20/kg-$6.50 of milksolids (previously $6.40 to $6.80). Westland chairman Pete Morrison said it was still competitive compared with other payout predictions. Fonterra’s forecast is $6.40 (plus earnings per share in a range of 35 to 45c), and Synlait’s $6.50.
Maan said Southern Pastures and Westland would look at the possibility of a 50:50 joint venture to create products based on ‘‘stringent standards’’ covering animal welfare, human health, sustainability, climate change, and human rights. ‘‘We believe discerning consumers will pay a premium for high-quality, healthy, traceable products,’’ Maan said.
Morrison said any Westland shareholder would be able to supply for the venture, as long as they met the standards, and would earn extra income as a result. Key to the agreement was Westland’s ability to process milk from different sources. ‘‘ ‘‘We can economically and efficiently produce separate specialty lines with very little impact in terms of cost and time management on how the plant is normally run,’’ Morrison said. Lewis Road Creamery, which is 25 per cent owned by Southern Pastures, would buy some of the Southern Pastures’ milk processed through Westland.
Maan said Southern Pastures had been impressed by Westland’s recent turnaround, board restructure and its ‘‘new openminded focus on ‘nourishment’ as opposed to simply marketing a suite of traditional commodity products’’.
After several seasons in the doldrums and following farmer disquiet, Westland posted a net profit of $1.5m in the 2016-17 financial year, compared with a $10.3m loss the year before.