Future is bright for dairy industry

JON MORGAN
Last updated 06:15 03/04/2014

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OPINION: Wonderful, Fonterra wants more milk. But first, it has to show it can handle the milk it gets now. Creating stinking great milk lakes is not the way.

To be fair, the milk glut of last year was a result of freakish growing conditions.

And Fonterra has learnt its lesson. It couldn't make the in- demand milk powder fast enough and had to divert milk into production-costly casein, cheese and other products - and consequently earnings dipped. So it is building more powder dryers and improving its work flow.

Most of the extra milk will be from New Zealand and some will come from Australia.

It's important in the present climate of fear created by environmental alarmists that Fonterra, aided by DairyNZ, carefully explains where the extra Kiwi milk will come from.

Some will be from new conversions and expansion - there's still plenty of unused dairy land out there, an acreage that grows in proportion to the payout - and some will be from improved genetics, reproduction and pasture management.

Growing the milk supply is a sound business decision. Milk powder is the basis of our economic wellbeing. The forecast payout of $8.75 represents a $13.8 billion injection into the economy. And 50 cents in every $1 of payout is spent by farmers locally.

Fonterra is astute enough to recognise that it can't put all its eggs in the powder basket. Its priorities are to grow sales of ingredients, nutrition and foodservice products and reports that emerging market growth is moving faster than expected.

It's clear our economic future will have a strong dairy component. That can only be good.

The tricky part for Fonterra is to keep the bad news to a minimum. No more milk lakes, food safety scares or overseas corruption exposures. They divert attention from the good economic news story.

Unfortunately, the bad news from the environmental lobby seems to have a life of its own. Whatever the dairy industry does will never be enough to please these people.

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- Straight Furrow

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