Farmers have to stay with Fonterra

Northland dairy farmers keen to switch suppliers are being forced to stick with Fonterra because of a lack of competition in specialist dairy manufacturing businesses in the region.

Dairy farmers' representatives said Northland did not have the benefits enjoyed by those in bigger regions such as Taranaki and Canterbury where new manufacturers were picking up Fonterra customers.

Rakaia-based specialist dairy manufacturer Synlait Milk and Open Country Dairy, the country's second biggest dairy manufacturer, has picked up new dairy farmers recently.

Fonterra farmers have to own shares in the co-op to supply it with milk, and some have been selling shares to supply competitors who do not require share ownership and who are offering similar farmgate milk prices.

Ian Walker, Far North farmer and president of Farmers of New Zealand, said Northland dairy farmers have no choice but to sell to Fonterra.

"It's good to have competition because at the moment Fonterra is over controlling and demanding in a lot of things. Some farmers in Northland would change suppliers if they have an option," he said.

He said that apart from a lack of competition, Northland's geographic sparsity, increased freight costs, and less volumes of milk production compared with other areas meant the region's dairy farmers would have to stick with the status quo.

The other downside for farmers was having to buy shares in the co-operative where they were losing money by paying more than $5 a share but receiving between $3.80 and $3.90 per kilogram of milk solid.

Federated Farmers' Northland dairy chairman, Ashley Cullen, said some Northland farmers would switch to new suppliers if they could. But some farmers were concentrating on switching from dairy to beef, although no one knew how long beef prices would remain good.

He said the international dairy auction today would be a good indicator what this year's milk prices would likely be.

Fonterra's shareholders learned in March their milk solids were worth only a grim $3.90 a kg at the farmgate, down from the forecast of $4.15 kg.