Synlait doesn’t anticipate any problem securing supply for the new plant, despite Fonterra’s plans to build just 30km away at Darfield.
“We think there’s going to be plenty of milk to go around and our strategy has us taking quite a small proportion of the milk that’s going to be available,” says chief executive John Penno.
“We don’t see it as a difficult task to attract perhaps 20% of the locally available milk…
Canterbury is the fastest growing milk supply base in New Zealand with compound average growth rates of around a bit over 10% last decade and we can expect that to continue to grow.”
The competition the company creates for Fonterra is a good thing for farmers, he believes.
“It provides dairy farmers real options where to supply their milk. We think that’s a very important thing.”
Exactly how much extra milk will be required will depend on the product mix from the new plant, but it will be in the order of double the current intake of about 25 million kgMS/year, says Synlait chairman Graeme Milne.
Milk from Fonterra under DIRA regulations, which Dairy News understands Synlait has been using to the max at 50m litres/year, will still be part of the equation.
“As we grow that becomes a smaller and smaller proportion of the total milk we process,” Penno told Dairy News at the partnership launch.
“I think this coming year it will be less than 20% and with the new plant coming on it will head down towards 10%. We can’t rely on that being there forever.”
Suppliers are queuing up to deliver more milk, he adds.
“We are full at the moment and we are taking all the additional milk we can for the new season which is about four million kilos. And we will be working with our farmers to bring on the milk we need to fill up the expansion.”
Adding to Synlait’s own farm portfolio doesn’t appear to be part of the strategy.
“The opportunity of the processing business to grow and develop is well beyond our ability to keep up on our farms. They are already only 25% of our intake and as we expand I expect that to fall back to 12-13%.”
