|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.