Though the company says it already has enough new suppliers contracted or committed to fill its under-construction second drier in Southland to capacity and a waiting list of farmers in Waikato, it is still months off making a decision about whether to build a new processing plant at Horotiu, near Hamilton.
Chairman Laurie Margrain said no decision on expansion in the North Island was likely until the second wholemilk and skim milk powder drier at Southland was complete.
The new drier is scheduled to starting operating next September.
There is speculation in Waikato the region’s fast-recovering economy is to get a further boost from an Open Country plan to build a processing plant at Horotiu, near the Affco meat processing plant of major shareholder Talleys.
The company has resource consent for a dairy plant at Horotiu but Margrain would not be drawn on plans.
“There won’t be any decisions until Southland is complete. It’s better to do a superb job of what we have first than expand for the sake of it.”
Open Country, privately owned and the world’s second biggest exporter of whole milk powder after Fonterra, will not say how much the Southland expansion is costing.
It is understood the drier has the capacity to process milk from 50,000 cows a year and that it will be supplied entirely by new farmer recruits.
This is Open Country’s 10th season. It started with just two suppliers making cheese at Waharoa in Waikato and now has more than 600 farmers supplying three milk powder sites at Waharoa, Wanganui and Southland.
Its options for North Island expansion include a new build at its site at Moerewa in Northland and adding to its Wanganui plant. The Northland option seems unlikely to be favoured and industry bets are on a new build at Horotiu.
OCD will face emerging competition for milk in Waikato from Chinese-backed export ice cream and infant formula plants under construction or planned.
Fonterra is also building a big new UHT plant at Waitoa, due to start production in the New Year.
Margrain said Open Country had to dispose of only 1000 litres of milk in Waikato, the country’s major milk production region, during this spring’s record production. But he would not say how much the company processed a day in Waikato.
Fonterra, announcing last week it was holding its forecast milk price at $8.30/kg MS and slashing the dividend from 32c to 10c a share because of a sudden and unexpected divergence in the price of milk powder relative to other products said it had lost money this season because it did not have the capacity to process all the milk it received.
Margrain said this season’s production situation “is not so unusual as to be unmanageable. It’s just what you have to deal with in business.”
However, he said Open Country exported all its product as commodities so was not caught by the margin squeeze Fonterra was experiencing on its consumer products as bumper international prices forced it to pay high prices for raw product.
It is difficult for Fonterra to pass on the higher milk price at the supermarket because of consumer resistance.
