Rennet casein prices on the Global Dairy Trade platform have soared 40% in the past six months to US$9000/tonne, the highest level since 2015.
Fonterra is the only manufacturer and exporter of rennet casein in New Zealand, at only two of its plants, Maungaturoto in Northland and Hautapu in Waikato.
Its production of the cornerstone ingredient for processed cheese is at maximum capacity.
Rennet casein production is between 16,000 and 20,000 tonnes annually, engineer David Macdonald, the product portfolio manager for protein and specialty products, said.
Demand for rennet casein is strong from key markets in China and Latin America as the generally cheaper processed cheese competes with higher-priced natural cheese out of the United States and Europe.
“European supply of rennet casein, which is our main competition, is stable, perhaps down slightly in their dairy off season,” he said.
“We expect European companies to ramp up and chase these high returns from March onwards.”
Fonterra’s rennet casein commands a premium of about 10% better than other sources because of its quality and consistency and some yield advantage to processed cheese makers.
The composition of typical processed cheese is about 17-18% rennet casein, Macdonald said.
Manufacture of processed cheese, the likes of Kraft single slices, is a recombination of dairy and non-dairy ingredients.
It is not cheese made from fresh milk and in NZ the best-known examples are the Chesdale varieties.
Processed cheese has a longer shelf life and melts without separation when heated and cooked.
Rennet casein sold on the GDT platform does not contribute directly with the farmgate milk price model as a reference product but goes instead to Fonterra’s earnings.
Less than 1% of total milk supply is used to make rennet casein powder from skim milk, leaving behind whey for use in other processes, Macdonald said.
In product optimisation calculations rennet casein is provides good returns relative to other processing streams but that can turn around quickly.
Rennet casein is considered a base level product and Fonterra makes higher forms of dairy proteins for specialised purposes, Macdonald said.
Rennet casein prices have traditionally been quite volatile and for that reason Fonterra would need to see a long-term trend to consider making more.
