Stanhope plant fuelled early season price rise

By Stephen Cooke

The opening of its new Stanhope cheese making facility enabled Fonterra to lift its opening price from $5.30 kg/milk solids (MS) to $5.50 kg.

It underpins the importance of the facility to Fonterra’s growth in Australia.

The New Zealand company has attracted 50 farmers from northern Victoria, most of which came from Murray Goulburn.

Fonterra lifted its price to $5.50 once it knew it had the milk secured to support cheese production.

The new factory has a capacity 50 per cent larger than the old factory burnt down in 2014. The additional milk means the new plant can be run at full capacity — processing 1.3 million litres a day, running 24 hours a day.

The new plant returns mozzarella production to Australia for the first time since 2013, helping to capture growing demand for cheese both domestically and across Asia, particularly in China and Japan.

Fonterra chair John Wilson told those at the launch that the company’s cheese, whey and nutritionals strategy, based in Australia, “is critical to the growth and drive in demand that is required from an increasingly demanding consumer base globally”.

"Global dairy demand is very strong, it is driven by the demand for high-quality nutrition, particularly into developing markets,” he said.

"But dairying is very volatile.

“World prices move very, very quickly when supply and demand is relatively balanced, and it doesn’t take much to create significant uncertainty in the dairy climate.

“Recently I’ve been with farmers in Europe, the US, South America, and home in New Zealand and here in Australia, and every single one of those farmers has had to deal with extreme volatility and have had to adapt their businesses to do so.

"The challenge for us and the challenge that we take on very strongly is to continue to build innovative plants, putting more and more product into food service, consumer and sophisticated ingredients to ensure we can deliver the best prices to our farmers.

“But ultimately I need to say prices will be volatile.”

Mr Dedoncker said the key driver for Fonterra in the Australian market was that it was “a really diversified business”.

It offered a diverse portfolio of productions into three distinct channels — retail, food service and ingredients.

“If you are focused on one product only with one trade channel only, you have a real risk in your business system,” he said.

“We don’t.

“We have three massive channels that we can send product through and we have at least four different product categories.”

“Fonterra cheese already tops more than half the pizzas made in China, and now we will be sending Australian-made mozzarella to cater for growing demand.”

Mr Dedoncker said 40 per cent of people in urban China eat at Western-style fast food outlets once a week, and the use of dairy in foodservice has grown by over 30 per cent in just five years.

“This growth has been helped by demand for cheese — as disposable incomes rise the dining-out culture is growing, particularly for pizza.

“In Japan, cheese consumption is rising by 3 per cent each year, with huge potential for growth.

“Japan is the world’s second-largest importer of cheese, with Australia their number one supplier — they’re our biggest market for cheese.”