On Thursday evening Fonterra said it would open the new season with a price of $4.75 per kilogram of milk solids, but told suppliers the $4.75/kg included 2c/kg to pay interest on loans. So the weighted average opening cash price was $4.73kg.
The move came as Japanese-owned Lion Dairy & Drinks late yesterday revealed it would pay the majority of its direct farmers in the southern region the net weighted average price of $5.67/kg of milk solids next season. This gives it one of the highest opening prices among the dairy processors. Its three-year fixed price is $5.50/kg of milk solids, while the one-year fixed price is $5.10/kg of milk solids and the one-year variable price is $5/kg of milk solids.
The Fonterra price was also higher than many expected and well above the opening price of $4.31/kg — or 33c a litre of milk — announced this week by embattled co-operative Murray Goulburn.
But it is below the opening $4.80 milk price offered by Warrnambool Cheese & Butter two weeks ago and the $5/kg set last week by Bega Cheese.
“What we have done is release a price that is reflective of the market in terms of the products we produce in Australia and the channels they go to,’’ said Matt Watt, National Milk Supply Manager at Fonterra.
“We are delivering and forecasting a market-based price.’’
The group is building a new cheese plant at Stanhope, on track for completion mid-2017, and is investing in its brands, including Western Star, Perfect Italiano and Mainland.
In February it launched the Anchor brand in Australia and has a deal with Woolworths to supply housebrand milk in NSW.
In May Fonterra lifted the prices it paid farmers for their milk after an outcry over its decision to slash them following the Murray Goulburn cuts.
Fonterra has about 1200 Australian dairy farmer suppliers, with about 900 of those in Victoria. It collects about one-fifth of Australia’s fresh milk.
Mr Watt said the group had seen an uptake in its branded products since the price cuts were announced by Murray Goulburn. “We have seen a shift in terms of fresh milk demand and we continue to see good demand for those branded products,’’ Mr Watt said.
John Hewlett, who was Murray Goulburn chairman for 12 years and retired in 1993, this week wrote to The Weekly Times newspaper condemning the co-operative.
Mr Hewlett said requiring farmers to repay moneys from this year’s income was ‘’unethical’’ and said the co-op must bear the cost of the over-payment, not individual suppliers. “I’m hoping the board will listen and take appropriate action,” he wrote.
Source: TheAustralian
Link: http://www.theaustralian.com.au/business/companies/fonterra-hopes-for-5-price-in-soured-milk-market/news-story/6c6deba025ef8ec75427d8ddea512c8c