Fonterra is scaling back how much milk it sources from Australian farmers after the NZ dairy giant posted a $NZ557 million ($A514 million) loss partly related to the drought across the ditch.
The dual-listed dairy processor said an increase in Aussie milk prices and input costs due to the big dry had necessitated plans to reduce what is the company's largest milk pool outside NZ.
Instead, Fonterra said it is was prioritising its NZ farmers as part of a company- wide shake up, after $NZ826 million of writedowns drove the company to its biggest annual loss.
Fonterra's investments in China, Brazil and Venezuela were written down by a total $NZ547 million, while it took a $NZ50 million hit against its Australian operations in FY19, with drought playing a major role.
Chief executive Miles Hurrell said Fonterra will would start rationalising its off- shore milk pools over time but would not give a specific target of how much its Australian collection will be reduced.
The amount of milk collected from Australian farmers in the 2018/19 season was 120 million kilograms of milk solids, 33 million kilograms or 22 per cent lower than the year before. Mr Hurrell maintained Fonterra would not completely back away from Australian milk.
"(While we will) focus on New Zealand, that doesn't mean it will be the extent of our business," he said on Wednesday. "The drought has played havoc for Australian dairy farmers and the Australian farmer community... and we've made tough decisions.
."One of those decisions was the closure of the 108-year-old Dennington plant in south- west Victoria, which cost Fonterra a total $NZ54 million in redundancies and plant and equipment impairments.�