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Business

Dairy exporter Fonterra aims to climb the value chain

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A Fonterra milk tanker drives along a road as it arrives at Fonterra's Te Rapa plant, located near the town of Hamilton, New Zealand on Aug. 6, 2013.   © Reuters

WELLINGTON -- Fonterra Co-operative Group, the world's largest dairy exporter, is pushing further into higher margin consumer and restaurant markets, but questions remain over whether it can catch up with leading global rivals. The cooperative's need to retain profits for growth is hamstrung by the need to return as much as possible to farmer shareholders, who have been losing money during a global dairy slump.

Critics of Fonterra, which accounts for around a quarter of New Zealand's exports and 17% of global dairy exports, say the cooperative's need to maximize milk payments to its farmer shareholders leaves it short of capital and forces it to turn most of its milk into cheap commodities such as milk powder. However, Fonterra has been quick to highlight strong growth in high-margin products in its latest results, and has forecast a further doubling in the next nine years.

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