Friday, March 29, 2024

DIRA threat to Fonterra

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Fonterra runs the risk of having stranded assets like the meat industry unless the Government changes its requirement for it to accept all new milk, chairman John Wilson says.
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“We can’t stay tight on our strategy,” he said after opening the co-op’s new milk powder dryer, the biggest in the world, at Lichfield, south Waikato.

“You can’t run a business like that.”

Wilson attacked the Dairy Industry Regulation Act (DIRA) requirement, saying it meant Fonterra had to carry inefficient processing capacity in case it was needed.

That was a cost to farmers and inconsistent with the Government’s desire to maximise earnings from the primary sector.

The new dryer, which was marginally larger than the co-op’s Darfield 2 dryer because of a larger air heater required to cope with the area’s humidity, came in $30 million under budget at $360m.

It can produce 30 tonnes of milk powder an hour and handle 4.4m litres of milk a day.

Wilson said it would strike a balance in processing to allow the co-op to switch between products quickly to meet demand and volume changes and deliver the best product mix to generate returns.

Milk volumes were down 14% in Waikato to date and 6% nationally.

Global operations chief operating officer Robert Spurway said the commissioning was smooth and gave Lichfield the chance to be the most efficient milk powder production facility in the world.

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