Long term lease boosts dairy export future

Good news for lower South Island dairy producers. Port Otago has announced a significant 35 year lease agreement with Fonterra for its dairy export warehouse in Port Chalmers.

The deal includes the sale of associated logistics operations to Fonterra.

Known as D Shed on Back Beach Road, the 34,200 square metre warehouse with a 12,000 square metre yard is primarily used for packing Fonterra’s Edendale product for export.

Effective from late last year, the site is now fully under Fonterra’s control and renamed Fonterra Port Chalmers.

It functions as a key pack point in the co-operative’s supply chain.

Sixteen skilled employees from Port Otago have transitioned to direct employment with Fonterra.

The arrangement allows Port Otago to focus on core port operations.

It also gives Fonterra greater control over its supply chain up to the wharf, which in turn could improve efficiencies and reduce costs.

Port Otago chief executive Kevin Winders described it as beneficial for both parties.

He noted it enables Fonterra to manage the site as one of its nationwide in-house distribution centres.

Fonterra’s director of global supply chain Santiago Aon highlighted the site’s importance in the lower South Island supply chain network.

He said the acquisition enhances efficiency and strengthens overall operations.

It also commits to ongoing collaboration with Port Otago and a smooth transition for stakeholders.

Edendale in Southland is one of Fonterra’s largest and oldest manufacturing sites, taking milk mostly from farms in Southland and Otago.

It processes approximately 2.4 billion litres of milk per season, and is estimated to export about 420,000 tonnes of finished product plus 30,000 tonnes of ingredients every year to more than 70 global markets.

Fonterra has shipped Edendale product from Port Otago since the early 2000s. Southport at Bluff is closer to the plant, but its container shipping capacity is limited.