“Today, the business is in a strong position. We continue to make the most of market conditions, including strong consumer demand as well as supply constraints globally.

“Long-term demand projections for organic dairy ingredients currently exceed our supply growth projections.

“Organic farmers earn a premium, and there’s also a benefit to all Fonterra farmers because around 20% of the programme’s revenue goes back to the co-op as a contribution to shared overheads and earnings,” Henderson said.

“More work is needed to determine whether there is sufficient supply interest in the right areas to enable efficient processing and to evaluate the investment needed to enable organic milk segregation and processing in the South Island.

“The midpoint for the forecast 2024-25 Organic Milk Price is $11.40 per kgMS, with a forecast range of at $10.90-$11.90, $11.40 is a record forecast price for our organic suppliers.”

“There are several certifications required for farmers to achieve full organic certification and enable Fonterra to fully use its milk in the range of markets we export to, including USA, Canada, Europe, China and South Korea.

“Some of the characteristics of an organic farm include focusing more on preventative cow health rather than treatment, and switching from synthetic herbicides and fertilisers to an increasing number of natural alternatives.”

Henderson said global demand is growing as consumers are prepared to pay a premium for organic products.

According to a Euromonitor report, the global organic dairy market is currently valued at around US$27 billion and growing at 6% year on year, projected to reach around US$65bn by 2033.

Liquid milk, fresh and UHT, is the largest single segment of the organic dairy market, but there is significant growth in organic ingredient demand including butter, cheese, milk powders and proteins.

A Fonterra spokesperson said the co-op is still focused on expanding the North Island’s organic milk supply.

Southland dairy farmer Dylan Ditchfield said because he has followed a regenerative approach to milk production for the past seven years, he would consider transitioning to supplying organic milk if the opportunity presented itself.

“As time has gone on we’ve become more aware of food integrity. We try to focus on producing food that is less chemical and fertiliser intensive and to develop pastures that are more nutrient dense, which then flows through into the milk that we produce,” Ditchfield said.

Ditchfield said farmers on a System 1, 2 or 3 should find it easier to transition to organic production.

“I think it’s a great opportunity to add another alternative to dairy farmers in Southland. It’s an opportunity for them to deliver their end product into markets that align with their values,” Ditchfield said.

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