The agreement, starting from the 2018-19 season, will add an extra 4m kilograms of milk solids to Westland’s milk collection annually, from Southern Pastures’ nine Canterbury dairy farms.
“Westland and Southern Pastures will also conduct a business case investigation with the intention of forming a 50:50 joint venture company,” Westland chair Pete Morrison said.
“The objective will be to process and distribute milk products that will be from free-range, grass-fed cows on farms that meet very high values covering animal welfare, human health, sustainability, the environment and human rights.
“The opportunity to supply free-range, grass-fed milk will not be restricted to the Southern Pastures farms. Any Westland shareholder who can meet the standards required will also be able to supply and take advantage of additional income that results.”
Key to the agreement, Westland said, was its ability to segregate and process milk from different sources.
“That is one of the advantages of the size of our plant,” Morrison said.
“We can economically and efficiently produce separate specialty lines with very little impact in terms of cost and time management on how the plant is normally run.”
Lewis Road Creamery
The agreement will also produce an immediate benefit for Westland as Southern Pastures will bring with it New Zealand dairy company Lewis Road Creamery.
This effectively creates a significant new customer for the West-Coast based co-operative with Lewis Road purchasing some of the grass-fed milk produced.
Westland’s board has also reviewed the company’s payout prediction, reducing it to a range of NZ$6.20-NZ$6.50 (US$4.56-4.78) per kgMS (previously NZ$6.40-NZ$6.80/US$4.70-5.00), which it said reflects market conditions.