Fonterra dumps milk supply deal with Woolnorth owner Van Dairy Limited

Woolnorth owner Van Dairy has had an exclusive supply agreement with dairy giant Fonterra for several years.

Fonterra on February 7 confirmed it had ended the supply agreement with Van Dairy and its Chinese owner, Lu Xianfeng.

"While we do not discuss the details of our confidential commercial arrangements, we can disclose that we made this decision based on a number of commercial factors we have been unable to resolve," Fonterra Australia's Matt Watt said.

"We stopped collecting milk from all VDL farms on February 1, 2024, after providing VDL with several months' notice to mitigate the impact on their business and support them in determining their next steps."

Van Dairy said it was committed to its workers despite losing the Fonterra contract which represented 25 million litres of milk each year.

Owner Xianfeng Lu said the Dairy Industry Code of Conduct had been set up to ensure such matters were approached in a constructive way and he was disappointed by the development.

Mr Lu said he remained fully committed to his dairy farms and the Circular Head region.

"I will continue to fight for the workers on my farms, the dairy industry and employment in the Circular Head region," he said.

"I am confident there are options out there for Van Dairy to continue its current operations and will continue to pursue these, despite the actions of Fonterra.

"Only this week I have renewed my support to the Circular Head Football Club as a sign of my commitment to the region and I will continue to fight."

Mr Watt said milk volumes supplied by VDL had declined significantly in recent years.

" ... our Farm Source team have been working with other farms to secure alternative milk supply," he said.

"We remain committed to our farmers, communities and people in Tasmania and our operations at Wynyard and Spreyton will continue, with no intent to reduce production."

Van Dairy sold part of Woolnorth in 2021, saying the money would be reinvested.

It also offloaded 12 farms outside the Woolnorth farm gate in that year for more than $60 million.

The company had been under pressure over problems with effluent management, animal welfare and infrastructure.

Fonterra is a dairy co-operative based in New Zealand, and one of the biggest dairy manufacturers in the world.

Fonterra Australia collects milk from farmers for its manufacturing operations in Tasmania and Victoria.

It helped Van Dairy with improvements after the problems at the property became known.