|August 18, 2003,
Fonterra: Fonterra, a New Zealand-based dairy
company, is preparing to increase premiums to organic
milk suppliers who choose to meet United States Department
of Agriculture (USDA) standards.
Fonterra aims to have all its organic milk meeting
the USDA standard within the next few years, a move
that will enable the co-operative to compete effectively
in the US where demand for organic dairy products is
expected to increase tenfold over the next five years.
Rick Carmont, Organics Business Manager for Fonterra,
says organic suppliers will ultimately benefit from
the move by getting paid more for their milk.
"Currently, Fonterra's organic suppliers receive
an additional 10 percent, and we will increase this
premium for suppliers who meet the USDA standards,"
he said. "Those organic suppliers who choose to
meet the standards will need to make a few modifications
to their operations, and we want to compensate them
for helping Fonterra create a competitive advantage.
The increased premium has to cover costs, as well as
provide a good incentive."
Mr Carmont says meeting the USDA standards will provide
a competitive advantage. "US consumers are looking
for the USDA seal on the organic products they buy,
as it assures them they are buying the highest quality
organic products," he said. "Therefore, Fonterra
has to be able to provide our customers - major food
manufacturers - with organic ingredients that meet the
USDA standard and carry this seal. This is essential
if we are to compete effectively."
Fonterra currently has 22 organics suppliers and processes
organic milk at three Waikato factories. Approximately
17 million liters of milk will be delivered this season.
The company is actively recruiting new organic suppliers.
A final decision on the exact premium is subject to
Fonterra completing its analysis. It will take several
years for the company to meet the USDA standards as
cows that have been subject to antibiotic treatment
must be ruled out.