'A good time to be in dairy', says Fonterra chairman

GERALD PIDDOCK
Last updated 05:00 08/05/2014

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New Zealand's dairy industry is well placed to take advantage of future global opportunities in emerging markets, Fonterra chairman John Wilson says.

The dairy co-operative was operating in a world that has experienced the biggest economic shift since the industrial revolution.

That meant 4.2 billion consumers were potential Fonterra customers out of a 7.9b global population by 2025.

"This is a very good time to be in dairy," an upbeat Wilson told 600 farmers at DairyNZ's Farmers Forum at Mystery Creek.

In China, the younger generation had leapfrogged the older generation socially and financially.

These consumers expect their food to be natural, pure, healthy and safe.

Wilson said he was "comfortable" with the co-operative's level of exposure in the Chinese market.

Fonterra was meeting demand in that market and responding to consumer needs, but it must grow its market in other regions to match the China growth.

These regions were Africa, Central Asia, the Middle East, China, Hong Kong and Taiwan, Eastern Europe, Latin America and South East Asia.

Those 4.2 billion consumers represented a "$30 trillion opportunity", of estimated value of private consumption in those emerging markets.

"It's very clear where the opportunities lie and they lie in these emerging markets," Wilson said.

These markets were also expected to grow at 2 per cent per year, according to the OECD, and Fonterra largely had existing businesses in these markets. The industry had come through a period where there was strong demand for products, a shortfall of supply and resulting strong prices.

Dairy products were expected to achieve average increases of 1.6 to 2 per cent per annum.

Wilson expected New Zealand to maintain its strong position in producing whole milk powder at 56 per cent of whole milk powder exports through to 2022. "Forecasts are very encouraging. There's no doubt about it."

He said the forecasts were translating into reality, but with "significant volatility".

That volatility around milk prices had always been triggered by global action and the cost of production, Wilson said.

The recent drop in GDT prices was not unexpected as the northern hemisphere supply picked up. He urged farmers to protect their low-cost producer position.

He also touched on farmer payout. The board had decided to keep the payout forecast at $8.65/kg milk solids. It will be reviewed at the end of May. 

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- Waikato Times

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