Pāmu Reintroduces PKE Amid Drought and Economic Pressures

Pāmu, a major New Zealand farming company, has reintroduced the use of palm kernel expeller (PKE) across its dairy farms after a ten-year hiatus. This decision was triggered by a severe drought affecting the central North Island, where the company operates a significant number of its 44 dairy farms. Pāmu's Chief Operating Officer, Will Burrett, noted that the company had exhausted all internal feed-sourcing mechanisms, leading to critical animal welfare and cost pressures, necessitating the use of PKE.

The reintroduction of PKE, a byproduct of the Southeast Asian palm oil industry, is viewed as essential during dry summer and autumn periods. New Zealand imported PKE worth $634.2 million in 2025 alone, highlighting its importance in the dairy sector. Despite previous expectations, financial incentives for producing non-PKE milk have not materialized, as major processors like Synlait ended their premium payments three years ago, while Open Country Dairy imposes no restrictions on PKE use.

Efforts to use alternative supplements, such as grains and soybeans, have proven costly, being 25% to 40% more expensive than PKE. This economic reality has made PKE a crucial component in managing farm working expenses and maintaining profit margins amidst changing overheads.

However, Pāmu continues to ban PKE use on its certified organic farms, which constitute about 25% of its milk production. These properties represent the largest source of organic milk for Fonterra. The organic segment is currently experiencing significant financial benefits, with Fonterra setting a record forecast organic milk price midpoint of $14.00 per kilogram of milk solids for the new dairy season.

The decision to reintroduce PKE is aimed at balancing operational costs and ensuring animal welfare during challenging environmental conditions, while maintaining a strict policy on its organic farms to capitalize on premium market opportunities.