Have we reached peak dairy factory?
The number of dairy factories sprouting in Waikato has got to the stage that farmers are concerned the industry has reached a tipping point.
They fear further growth could lead to overcapacity – too many milk processing sites – and dairying will follow the path of the meat industry, which over the past decade has been plagued by plant closures and job losses. . .
Fonterra Shareholder’s Council chairman and Waikato farmer Duncan Coull says it is becoming a national issue for the industry. It is bigger than Fonterra and an industry-wide discussion is needed to find a way to save it from itself.
“Do farmers really want to reach that tipping point because once that tipping point is reached, there is no turning back. We need to start asking ourselves the question as farmers what we want the industry to look like going forward.
“If farmers continue to allow capacity to be built and continued to supply that capacity, be very careful what we wish for, we are another red meat sector waiting to happen and we are another Australian dairy industry waiting to happen.” . .
Farmers like some competition but it the meat industry found out at great cost – in money and human terms – that it is possible to have too much competition.
Synlait chief executive John Penno says the dairy industry is already at overcapacity and the vast bulk of the processing technology built in recent years has been large-scale milk powder plants producing dairy commodities.
“There’s no question in my mind that overcapacity across the industry exists. But the real question is, is it the right capacity? What is the total capacity is the wrong question.”
Synlait does not operate in that market and builds plants focusing on high-end, value-added products. . ..
Farmers are free to choose which company they supply.
A new one might look attractive, especially if it doesn’t require suppliers to buy shares.
But the lesson from the meat industry is that more competition isn’t always better for farmers or the industry.