Fonterra selling businesses, US balancing dairy growth, EU delays investments
Fonterra has officially begun selling some of its assets. This includes its US$1.32 billion Australia and New Zealand business. Potential buyers have signed agreements to access confidential documents through Craigs, Jarden, and JPMorgan. The first-round bids are due by the end of March.
The company is exploring both buyer interest and the potential for an initial public offering in Australia and New Zealand. Fonterra announced plans to divest certain assets last year, including its Australian consumer, food service, and ingredient businesses, as well as NZ Fonterra Brands. These have now been consolidated into a new unit, Fonterra Oceania, which also includes its global consumer division and Fonterra Sri Lanka.
Key brands up for sale are Anchor and Western Star butter, along with Mainland and Perfect Italiano cheeses. Fonterra has also listed non-core assets across Asia, the Middle East, Africa, and the Americas.
According to analysts, interested buyers include FrieslandCampina, Lactalis, and Danone, alongside private equity firms. Analysts note that New Zealand’s lower supply costs make its assets more profitable than Australia’s, where farmgate milk prices remain higher.
Previously, in 2021, Fonterra attempted to float part of its US$790 million Australian consumer business but paused the deal due to unfavourable market conditions. Analysts suggest conditions in the Australian dairy sector should drive further price increases for Australian dairy farmers. International dairy prices have surged 17% since June, and the Australian dollar has weakened, yet farmgate price step-ups remain lower than last season.
The Global Dairy Trade index is at an 18-month high, with whole and skim milk categories performing well, but Australia’s average farmgate price remains 14% below last season.
US growth prospects
The US dairy sector is currently balancing growth prospects with challenges related to labour, policy changes, and health concerns. In January 2025, milk production across 24 major states saw a modest 0.2% increase compared to the previous year, totalling 18.3 billion pounds (8.3 billion kg). This growth is primarily attributed to a rise in the number of milk cows, which reached 8.93 million, an increase of 54,000 from the previous year. US dairy exports reached US$8.2 billion in 2024, marking the second-highest level on record.
Labour shortages, exacerbated by immigration policy uncertainties, continue to pose challenges for dairy farmers. The industry’s reliance on immigrant labour means that aggressive immigration enforcement could disrupt operations.
While primarily affecting poultry, the spread of highly pathogenic avian influenza has prompted states like Michigan to implement dairy surveillance programmes. These initiatives aim to monitor and mitigate potential cross-species transmission risks.
The USDA’s Agricultural Marketing Service recently announced significant updates to the Federal Milk Marketing Order pricing formulas, the first major revision in nearly 3 decades. These changes – effective 1 June 2025 – aim to modernise dairy pricing policies. The implementation of these amendments is scheduled for 1 June 2025, with certain changes, such as adjustments to skim milk composition factors, taking effect on 1 December this year.
EU – delay in investments
In Europe, Peder Tuborgh, CEO of Arla Foods, Scandinavia’s largest dairy producer, has highlighted that ambiguous European environmental regulations are causing farmers to delay investments. This hesitation led to a 1% decrease in milk production across Arla’s European farms over the past year. The lack of clear, long-term policies is contributing to supply constraints and rising dairy prices, according to Tuborgh.
Despite these challenges, the Danish-Swedish multinational co-operative reported a slight increase in revenue for 2024, reaching €13.8 billion (approx. US$14.8 billion), up from €13.7 billion (approx.. US $14.7 billion) in 2023.
