The dairy industry risked repeating the mistakes of the meat sector if too many new milk processors set up business, a farming leader warned yesterday.
Dairy Farmers of New Zealand Southland chairman Rod Pemberton said too many companies competing for markets could lead to prices being undercut and to educed returns to farmers, a scenario which is blamed for low lamb prices.
"I've been watching the meat debacle, where you have so many players. That's a concern for us.
"We could end up with too many processors, weakening everyone's position," he said, reacting to news a third dairy company, Mataura Valley, was establishing a plant in Southland.
Twelve months ago, Fonterra operated three plants south of Christchurch. Now, four were operating and by spring there would be six.
By late 2009, Mataura Valley and a major expansion at Fonterra's Edendale site would also be processing milk.
The pace of change has surprised Dairy Farmers of New Zealand national chairman Frank Brenmuhl.
"If you had asked me six months ago if I thought all these companies would be operating, I would have said `No'.
"I would have thought maybe one or two, but I thought things would have moved a little slower."
The dairy boom naturally drew international focus on New Zealand, the world's largest dairy exporter, as companies looked to shore up supply.
The obvious regions to set up processing plants were Canterbury and Southland, he said, where the average herd size was 500, compared with 300 in the traditional dairying regions of Taranaki and Waikato, and where there was still scope to expand.
Mr Brenmuhl did not think the competition would erode Fonterra's milk share, saying growth in the sector ensured there was plenty of new supply to be shared around.
Gore Mayor Tracy Hicks welcomed the arrival of Mataura Valley, saying it showed confidence in the region.