Synlait chief executive John Penno has rebuffed Federated Farmers’ suggestion that simple economics mean retail packaging of Synlait’s premium products will be in China following the Bright Dairy buy-in.


Feds Dairy chairman Lachlan McKenzie says that while there is talk about Chinese consumer-ready products being produced in Canterbury, the reality is the Emissions Trading Scheme will make it far cheaper to ship bulk milkpowder to China for value-added processing there.


“It doesn’t take a rocket scientist to figure out that since milkpowder is lighter and easier to ship than pre-packs, you won’t pay our labour and compliance costs just to produce it here,” he maintains.


Penno told Dairy News Synlait understands that is exactly the situation in the wider industry.


“However, Bright’s position in the Chinese market, the nature of the relationship, the shared strategy of Bright and Synlait and the legal agreements behind the deal give us every confidence that the expected value-added strategy will play out as expected.”


McKenzie also says the deal highlights the weakness of New Zealand’s capital markets, and the folly of the Dairy Industry Restructuring Act that continues to oblige Fonterra to supply Synlait with up to 50 million litres a season.


“New Zealand must be the only country in the world which forces its major exporter to help out its direct competitors.”


As for the capital markets, the deal is “a damning indictment” given Synlait couldn’t raise the investment funds domestically.


“I think New Zealanders should be thankful Fonterra, Westland Dairy Cooperative and Tatua Cooperative are owned by Kiwi farmers.”