by Jeanette Fitzsimons
Several new Fonterra plants have been officially opened in the last week or two, though they have all been running for a few months. Together they suggest the company may finally be giving some weight to the “value” component of its mantra, “Volume, Value, Velocity”.
We have criticised Fonterra in the past for its push for more, more and more milk, leading to farm intensification, more water pollution and more greenhouse gases. So it’s only fair we issue a cautious bouquet when they balance that with added value.
Bill English has just opened the new Reverse Osmosis plant at Edendale, the largest dairy factory in the southern hemisphere. Reverse osmosis is a widely used technology which purifies water or concentrates liquids by passing them through a membrane under pressure.
Whole milk can be concentrated down to 40-50% of its original volume, which should mean a saving of more than half the coal needed to dry it to powder or to MPC (milk protein concentrate). Certainly the changes at Edendale, which include an MPC plant and another making anhydrous milk fat (industrial butter) have added considerable value to each litre of milk with no additional coal boiler, even though an additional 1.4 million litres a day of milk are being processed.
Imagine the impact on Fonterra’s coal use if all their large plants used reverse osmosis prior to drying. It would also make it easier to source and handle the waste wood which must eventually replace that coal.
In the same week Steven Joyce opened a $72m expansion at Clandeboye which doubles their production of mozzarella cheese, making enough to top 300 million pizzas a year. Leaving aside the question of just what they have done to speed up the process from 3 months to 6 hours, this is a much higher value use for milk than bags of powder.
An $11m upgrade at Hautapu has doubled the production of lactoferrin, a milk-derived protein known in the industry as “pink gold” which fetches up to $1,000/ kg. Te Rapa factory is reported to have doubled its production of cream cheese.
All this points the way to a much smarter strategy than constant growth in bags of milk powder, with high environmental impact for low prices. Why, then, persevere with the huge expansion of coal fired milk drying at Studholme when there are demonstrably smarter ways to invest capital?
Perhaps Robert Spurway, Global Affairs manager, is having another think – he was reported last week saying that there is “no specific timeframe” for the Studholme plant, and Fonterra is not committed to it. Certainly it is hard to see where the extra milk will come from, with prices showing no sign of recovering and many farmers reducing production to save costs. This year’s milk production is expected to drop by at least 3 and maybe 5%.
With the benefits of adding value at existing plant now well demonstrated; with less milk flow and unhappy farmers, now would be the right time to call it quits and announce that Studholme will not go ahead, but that instead the capital will be invested in making more value for farmers from the milk they already produce.