Not always milking it

Fonterra and other processors are paying a premium for milk collected during winter but farmers have been cautioned the payments are not the bonanza they seem.

South Island farmers are especially finding it hard to make a good profit because their milk has to be transported to Christchurch, for which they pay a higher transport surcharge.

In the North Island, Fonterra pays an average of $3.15 per kilogram of milksolids for the months of June and July – totalling $9.90 (based on the base price being $6.75 kg/MS).

It charges a transport fee of 2.5c per kg/MS per 10 kilometre straight line distance from a nominated plant in both islands.

South Island farmers are not as well off because of the distances their milk has to be carted, although their average premium payment is $3.91 over the two months.

David Lindsay, who farms in Drummond, central Southland, said the nearest processing plant, Edendale, was closed for maintenance.

Most of his milk has to go to Canterbury because Fonterra has an obligation under the Dairy Industry Restructuring Act to supply Goodman Fielder with fresh milk for the South Island. His cost of transport is $1.25 per kg/MS.

‘‘We want to be treated the same as everyone else in the co-op, and as such want to see the contracted transport charge removed or at least averaged out across the winter milk suppliers,’’ Lindsay said.

‘‘Fonterra has not yet invested in a value-added plant in our region that could use our winter milk, and I am being penalised for that as I have to bear the cost of transporting it to Canterbury.

‘‘Wouldn’t it be great if Fonterra could focus on adding as much value to the milk we produce in New Zealand first before investing millions of dollars of farmers’ money in overseas investments,’’ he said.

A Fonterra spokesman said it had made Southland farmers aware of the fact the milk would have to go a long distance. The option to supply in winter was not available to Tasman or Mackenzie Basin farmers.

The question of whether a value-add plant should be built in the deep south had been debated. With demand for products such as cream cheese or UHT milk, this was always a possibility.

Up until the Cadbury factory closed in Dunedin, some winter milk made its way there.

Lindsay said South Island winter milking was more challenging because the grass growing season was shorter and winters were longer.

‘‘It helps cash flow. But there are lots of extra costs such as feed pads and barns.’’

Lindsay said he had started winter milking 14 years ago but Fonterra had not offered the contracts in the Otago/ Southland region several years ago before restarting them last year.

Federated Farmers dairy chairman Chris Lewis, who winter milks in Waikato and supplies to Open Country Dairy, said while it was good for cash flow, it also put a heavy load on infrastructure, particularly in a very wet season such as last year, and there were extra feed costs.

‘‘We’ve actually had two wet winters so it hasn’t been as good as budgeted. The dollars sound attractive but the margins aren’t all that good.’’

‘‘It can be profitable but before farmers jump into it they need to do their homework,’’ Lewis said.

It was also taxing on staff who wanted a break.

He had to hire someone extra so his staff could take time off.