Fonterra to keep investing in Cobden factory as dairy confidence remains high

Fonterra Australia managing director René Dedoncker, who was visiting the south-west this week, said the company had performed well over the past year and that would continue in the next 12 months.

Mr Dedoncker said the impact of power prices on Fonterra had been "quite extraordinary" with gas being its biggest cost.

"It's in the millions year on year, in fact even on a monthly basis, this time this year versus last year it's still in the millions," he said.

"But that's the reality in the industry actually, so again it doesn't help whinging about that because no one is going to listen.

"You need to have a business system that deals with it. How do you find efficiency? How do you put pressure on that cost but ultimately how do you recover it in a responsible way."

Mr Dedoncker said Fonterra was "invested" in the future of the Cobden site which was three factories in one producing Western Star butter, milk and powder.

"In the last couple of years we've invested millions of dollars of capital into that site, and we will continue to do so because we need more production and we need it to be efficient," he said.

The company was expecting a "modest" increase to milk supply of about two or three per cent.

"So it's not an extraordinary amount, it's just simply saying the modest growth we expect will be great for our business," Mr Dedoncker said.

"We've all got the inflationary pressures. Everyone sees it whether it's your interest rate, your gas bill, your electricity. It's all about margin.

"We need to make sure the farmers have the right margin to be able to invest in their business, to feed their families, to grow.

"We're definitely providing a milk price that does that, and the job is to keep doing that but at the same time Fonterra needs to maintain a margin because we've got shareholders and owners.

"So we're able to do both."

Mr Dedoncker said things were looking positive for the future of the dairy industry going forward. It comes after some turbulent years for the sector.

"I think we've had a few years now where margins have been great. It is quite buoyant," he said.

There are hopes the positivity in the industry would lure more into the industry with a labour shortage still a challenge for the agriculture sector.

"We need more people to come into the industry," Mr Dedoncker said.

"We've got a better story to tell. It's not just one year, it's multiple years."

He said there was a "confident undertone" across the industry. "We're definitely in a good place."

Kirkstall farmer and Fonterra supplier Chloe Brown said it was the best autumn they'd had in a long time. "There's grass everywhere," she said.

"I think there's a heap of confidence in the industry."

After the past few years of good milk prices, they had been able to invest in their farm to make efficiencies and future-proof their farm which milks 220 cows.

Ms Brown said the cost of production had increased last year, and some of those costs were still there.

"But our margins this year are probably going to be better than last year on a lower milk price simply because our costs have come back a little bit," she said.

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