Chilean dairy farmers threaten to break away from New Zealand owned Fonterra Milk Company

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Disgruntled Chilean dairy farmers have threatened to stop supplying Fonterra because they say they are being underpaid for their milk.

The dairy giant has a 86 percent ownership stake of processing company Prolesur, but some small farmers in southern Chile who supply it are unhappy with their treatment.

New Zealand dairy consultant Mike McBeath, who is chairman of Chilean company Chilterra, said it was looking to combine with about 200 farmers to create a rival co-operative.

In the last nine years, the Soprole/Prolesur conglomerate has declined from being the number one dairy company in Chile with 25 percent market share to second ranking with 19 percent share and still dropping.

It is being outperformed by local co-operative Colun, whose milk supply has risen to 27.4 percent.

A Fonterra spokeswoman said the “slight decline” in supply followed Prolesur moving away from winter bonus payments, as it encouraged farmers to stick to a pasture-based farming model.

Prolesur’s strategy promotes a pasture-based feed system in order to achieve sustainable and globally competitive milk quality.

Fonterra in New Zealand pays its farmers about NZD 6.00 per kilogram of milks solids, down from $6.50 last year. The spokeswoman said the payment systems were not identical, so should not be compared like-for-like.

In 2016 Fonterra got offside with dairy farmers in northern Chile whose milk was collected by Soprole. They accused it of refusing to take their milk in favour of sourcing it from large suppliers.

“It would  appear they don’t want to pick up small farmers’ milk – but over there it’s a different ball game, a small farmer has between five and 30 cows,” McBeath said.

Chilterra has attempted to introduce Kiwi dairy systems into Chile. The company is managed by Chileans with New Zealanders providing the technology, training and know-how and moral support.

Traditionally farmers have modelled their practices on European and North American systems but over time Chilterra has aligned its cow herds to spring calving whereas most farms calving is year round.

Despite its Chilean issues, Fonterra increased its 2018 before-tax profit in Latin America to $117m, up from $98m the year before. It employs over 4000 people worldwide at seven manufacturing sites and has revenue of NZD 2.27 billion.

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