BioGro and Fonterra

The Fonterra Co-operative Group announced in March 2015, that it was interested in a new supply of North Island organic milk to meet growing market demand.

Fonterra first offered organic milk contracts in 2002, but because of slowing demand during the Global Financial Crisis, in 2011 the company renewed contracts only in the Waikato and Bay of Plenty. Demand then increased, so all organic-certified suppliers with existing contracts had them renewed except those in Northland.

During the three years it takes to convert a farm to organics, new suppliers will be paid a 45 cent per kg of milk-solids incentive, to help cover costs. Once certified, they will be topped up to the full premium. This was $1.05/kg MS in 2014-15, lifting to $1.50 from June 1 2015.

The new premium is aimed at attracting an extra 600,000 kilograms of organic milk solids per year and increasing security for 73 organic suppliers.

Fonterra has a list of farmers interested in converting and is now working with these people on the process towards certification, plus picking up on new interest.

The new rolling contracts are aimed at providing long-term security for customers of organic milk products, Fonterra and suppliers. Fonterra must give 28 months notice to cancel a contract and farmers 16 months notice to quit supply.

Organic milk accounts for less than 1% of Fonterra supply. In May 2015, the company launched Anchor organic milk to be sold in New Zealand and also produces a range of branded and ingredients products including organic-certified cheese, full cream milk powder, milk protein concentrates, non-fat dried milk, skim milk powder, butter and fluid milk.

Wairarapa dairy farmers Alex and Ann Webster converted to organic dairying eight years ago. They are convinced that organic dairying has improved their bottom line by saving costs as well as benefitting the environment. Their cows are happier and working on the farm is more enjoyable.

Alex and Ann Webster are organic dairy farmers, milking 540 cows on two farms near Featherston in the Wairarapa. Disillusioned with escalating costs under conventional management, they converted to organic dairy farming in 2007.

“We were getting older and looking for a new adventure,” Ann says. “We’ve always farmed sustainably so going the next step to organics made sense.”

After 18 months in transition, the couple’s stock were BioGro-certified but for the land to be certified took a further three years.

At that time, Fonterra was offering a 20% premium above its standard price for organic milk supply and 7% during three years of conversion. Four years later the company stopped offering organic contracts.

The Websters were shocked at Fonterra’s decision but confident it would be reversed before their contract had run its time. This proved correct so there has been no interruption to their ability to keep farming organically while being paid a premium.

The Websters farm two properties as a unit. Older cows are run at the 131 hectare Oakridge Farm and two and three-year-olds at 89 hectare Ardroy Farm. Cows are wintered and young stock run on a further 141 hectares where they also make hay and baleage.

Having this extra land means there is no need to graze stock off the property or buy in supplements. The couple breeds their own Kiwi Cross (Jersey-Friesian) cows and bulls, although buying in non-certified bulls is allowed under BioGro rules.

Organic farming has improved profits by reducing costly inputs, they say. With a focus on keeping stock healthy rather than treating illnesses, cows are happier and healthier.

One of the Webster’s main worries about converting – how to prevent bloat without drenching – has proved unfounded. They suspect grazing on mixed species pastures rather than straight ryegrass fertilised with urea, is better for the cows’ metabolism. “We’ve gradually oversown mixed species including chicory, plantain, clovers and ryegrass,” says Ann. “It’s more of a salad now.”

One of the first things the couple noticed after their switch to organics was that their cows smelled different, their milk was less frothy and cream didn’t settle out.

Organic dairy farmers face the same challenges as their conventional neighbours around dealing with effluent, says Ann. New effluent ponds with 40 days storage are about to be built and waste will be sprayed over a bigger area. There is also the option of spreading the treated waste on runoff blocks, using an effluent tanker.

In the eight years they have farmed organically, the Websters have employed 28% sharemilker, Andrew Scott. This frees up time for involvement with the Wairarapa Moana Wetlands Project, a partnership between the Department of Conservation, Greater Wellington Regional Council, South Wairarapa District Council and iwi. The week before Rural Delivery visited, 3500 native seedlings had been planted into a two hectare wetland created on their property.

Ann makes time to ride horses and is treasurer of two dressage clubs. Alex is deputy chairman of the iwi-owned Aohanga Incorporation which farms Owahanga Station, near Pongaroa in the Tararua District.

The Websters say the rewards of farming organically are plentiful. The one thing they struggle with is the paperwork involved in certification and pedantic annual BioGro audits. However, they accept that accurate records and attention to detail is what makes this organic brand so credible.

Korean and Chinese auditors also make annual visits to the property with a Fonterra representative, to check farming practices meet BioGro certification requirements.

BioGro chief executive, Donald Nordeng says he’s seen increased interest from dairy farmers in switching to organic production since Fonterra re-launched premium organic contracts in March 2015.

In 2011, there were 120 organic-certified dairy farms in New Zealand. After Fonterra withdrew its incentive, this fell to 73 certified with BioGro and AsureQuality.

Markets for organic foods have grown significantly in the last three years, especially for infant formula and baby-food, he said. In the EC, 60-70% of baby-food was certified organic and in New Zealand, 35-40% of baby-food sold at New World supermarkets was certified.

A small amount of fresh organic milk was also air-freighted to China.

Organic dairy farms had a much lighter environmental footprint than conventional farms, Mr Nordeng said.

BioGro is a partner in the New Zealand Sustainability Dashboard, a tool for measuring and reporting sustainability. A close-to-complete organic dashboard would reveal a low carbon footprint for organic versus conventional dairying, leading to savings in compliance costs, Mr Nordeng said.

Stocking rates were relatively low on organic farms, nitrogen fertilisers were not applied and the compost made and used sequestered carbon.