Fonterra US export agent deal ends

MICHAEL FOREMAN
Last updated 15:10 12/02/2014

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Fonterra and United States-based marketing co-operative DairyAmerica have ended a 13-year old export agreement.

Under the agreement, which was signed in 2001, Fonterra has acted as DairyAmerica's export agent for skim milk powder. The agreement will end on August 1, the companies have confirmed.

DairyAmerica's members include Agri-Mark, California Dairies, O-AT-KA Milk Producers and United Dairymen of Arizona.

Its members account for about 45 per cent of the non-fat and skim milk powder produced in the US.

According to DairyAmerica the export contract with Fonterra was ended by mutual agreement.

"We are increasing the availability of our product to the international market and see this as the right time to chart our own course and sell direct to customers," DairyAmerica chief executive Hoyt Huffman said.

Fonterra director of global sales Tim Deane said the move had been planned for 12 months and was "not a surprise" to Fonterra.

The decision had "absolutely nothing to do with recent contamination scares", he said.

"They are gearing up to do more exporting and it was sensible for them to do it themselves," Deane said.

"As you grow in scale it makes sense to employ your own direct sales force rather than use third parties."

Deane said the contract was "not particularly significant" to Fonterra in dollars terms but he would not say how much it was worth.

DairyAmerica has also been using Fonterra's online trading platform GlobalDairyTrade (GDT) to market skim milk powder to international customers since 2011.

GDT is owned by Fonterra, with Fonterra products representing 89 per cent of the product sold in its fortnightly auction.

GDT director Paul Grave said DairyAmerica was "a significant player" on the platform but volumes or details of its trades were not made public. As far he was aware DairyAmerica would continue to trade on GDT as it operated independently from Fonterra.

"Its export contract with Fonterra is totally separate," he said.

NZX Agri analyst Susan Kilby said airyAmerica was one of the biggest US dairy exporters but the US generally had not been a big dairy exporter in global terms, exporting about 15 per cent of its domestic production.

"US producers have tended to export only when they have an internal surplus," Kilby said.

"When they do export they tend to sell to the same sort of places that New Zealand does, but they haven't built up long term relationships with export customers in the past."

However, US dairy producers had begun to export more aggressively recently, Kilby said.

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According to US Dairy Export Council figures, US dairy exports were worth US$6.7 billion ($8 billion) last year, up 31 per cent from 2012. On a volume basis, US exporters sold 1.77 billion kilograms of milk solids, 19 per cent more than 2012.

- Fairfax Media

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