Nature of co-op’s sales to US should give some buffer.
The tariff war launched by United States President Donald Trump will have an impact on Fonterra’s US market, but it is too early to predict the extent of this.
So says the co-operative’s global ingredients president, Richard Allen.
One advantage Fonterra has is that the bulk of its products in the US market are high-value products that US producers do not produce enough of.
These include protein ingredients that go into the lucrative sports, medical and nutrition industries as well as everyday consumption products.
They also go into the US virtually tariff-free, he said at an event at Fonterra’s office in Auckland that showcased its ingredients and foodservice products.
The other factor in this is the products the US sends to China. At the moment, Fonterra does not foresee that affecting its business, he said.
“The reason being is the largest US export into China is quite a simple whey powder that goes into animal feed.
“Most likely what it will mean is China will redirect purchasing from Europe.
“That US product will either end up being consumed in the US or trickle down to South America.”
Fonterra does not produce whey powder at scale so there should not be disruptions, nor should it affect demand.
The US’s large and well-established dairy industry means that rather than sell core products into that market, Fonterra sells advanced products, especially proteins.
The protein derived from milk is turned into protein concentrate products which are then broken apart as either casein or whey protein.
These are sold as advanced ingredient products such as whey protein products in the sports industry. Fonterra also sells milk protein concentrate that is turned into everyday consumption products – such as drinks and bars.
The market has really climbed in the rankings in terms of its importance to Fonterra, Allen said.
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