With the Cadbury factory in Dunedin no longer wanting as much milk, Fonterra is not re-signing South Island farmers for winter supply as individual contracts end.
Fonterra director of milk supply Steve Murphy said the company had been up-front about winter contracts finishing.
“However, we are making the commitment that we will pick up milk through winter in the south. We have a service to provide.”
With the Edendale plant shutting at the end of May, as well as Stirling near Balclutha, milk in June and July will head north to the Studholme processing factory in South Canterbury, which Fonterra bought from New Zealand Dairies late last year.
Open Country, the other processor in the south, closed at the end of May and restarted in August so plant maintenance could be carried out at its Awarua Bay factory, chief executive Steve Koekemoer said.
Farmers committed to supplying the company must dry off cows.
Murphy said winter milk contracts and shoulder premiums were available to farmers in the North Island to supply the national liquid milk market and the new UHT milk processing site at Waitoa in Waikato, which was scheduled to start operating in April.
Fonterra would not say how many farms in the south had winter milk contracts. Farmers said the amount paid above the payout was close to $4, less penalties for distance from the Cadbury factory.
Westpac agribusiness lower South Island area manager Peter Moynihan said although he hadn’t seen a cost analysis of winter milking in Southland, farmers who were doing it were making it work. It was especially useful for farmers with wintering barns.
“I’m not sure if everyone with barns is milking all year round but they are calving earlier than they used to and they’re also extending their lactation into June and July because they have a barn. The dry period for the cow is becoming a lot shorter.”
However, farmers were not building wintering barns just so they could milk through winter, he said.
“It’s about avoiding pasture damage, it’s getting livestock in the condition they want and not sending them 100km away for grazing and there is the environmental side as well.”
There were about eight types of wintering barns being built in Southland, from plastic tunnel houses costing about $300,000 to free-stall barns that cost more than $2.5 million, he said.
“Some people are running simple silage systems but others are feeding grain in them, so how they are run is very variable as well.
“The costs of wintering don’t stop just because you have barn. You still have to get the feed to the cows.”
Westpac was approached by one or two farmers each year in Southland who wanted to build barns and the bank viewed it the same as buying a runoff for wintering.
“Our biggest consideration always is cashflow and does the farm have enough security? We look at the whole farming business.”
Wintering was one of the biggest issues in Southland and one rule didn’t fit all, he said.
“There are many solutions for wintering and producing winter milk and individuals have got to make their own choices. As a bank we have no preference.”
