Chile farmers sour on Fonterra

Disgruntled Chilean dairy farmers have threatened to stop supplying Fonterra because they say they are being underpaid for their milk.

The dairy giant has a 86 per cent ownership stake of processing company Prolesur, but some small farmers in southern Chile who supply it are unhappy with their treatment.

Waikato dairy consultant Mike McBeath, who is chairman of Chilean company Chilterra, said it was looking to combine with about 200 farmers to create a rival co-operative.

In the past nine years the Soprole/ Prolesur conglomerate has declined from being the number one dairy company in Chile with 25 per cent market share to second ranking with 19 per cent share and still dropping.

It is being outperformed by local cooperative Colun, whose milk supply has risen to 27.4 per cent.

A Fonterra spokeswoman said the ‘‘slight decline’’ in supply followed Prolesur moving away from winter bonus payments, as it encouraged farmers to stick to a pasture-based farming model.

Prolesur’s strategy promotes a pasturebased feed system in order to achieve sustainable and globally competitive milk quality.

Fonterra pays its farmers about $6.40 per kilogram of milksolids, down from

$6.50 last year.

The spokeswoman said the payment systems were not identical, so should not be compared like-for-like.

She said Prolesur supported farmers with on-farm services similar to what was offered through Farm Source and was working to educate the next generation of farming.

‘‘Every year, Prolesur organises a farmer trip to New Zealand to see best practices. Over the past three years, about

100 farmers have visited the North and South Island to see the whole value chain and bring back knowledge and ideas to make their farms more sustainable and profitable’’.

In 2016 Fonterra got offside with dairy farmers in northern Chile whose milk was collected by Soprole. They accused it of refusing to take their milk in favour of sourcing it from large suppliers.

‘‘It would appear they don’t want to pick up small farmers’ milk – but over there it’s a different ball game, a small farmer has between five and 30 cows,’’ McBeath said.

Despite its Chilean issues, Fonterra increased its 2018 before-tax profit in Latin America to $117m, up from $98m the year before. It employs over 4000 people at seven manufacturing sites and has revenue of

$2.27 billion.