Last week the United Dairyfarmers of Victoria and Australian Dairy Farmers were scathing of Fonterra and the Bonlac Supply Company’s statements indicating a higher available opening price of $5.70 a kilogram of milk solids as this included the 40c kg/MS incentive for milk supplied next year.
Mr Jenkins said the $5.70kg/MS does not reflect the current market price, and history had proven paying more than what the market was delivering had proved dangerous for the industry. “Saying $5.30kg/MS is what our product mix is returning but we are going to pay $5.70kg/MS — this is what got us in trouble two years ago,” he said.
Mr Jenkins said including the 40c/kg incentive in the opening price was causing “angst” among suppliers as 40 per cent of Fonterra’s supply base took a Fonterra Australia Support Loan after the milk price crashes in May and June last year. He said those with the support loans — most affected by the crash — wouldn’t get anywhere near the $5.70kg/MS because the 40c kg/MS would have to pay back Fonterra.
But it is not just Fonterra which has included incentives in its headline price and Mr Jenkins said the industry needed all processors to separate incentives from the market price.
When asked if including incentives in the opening farmgate milk price announcement meant it had broken the new voluntary code of conduct, Mr Jenkins said: “It is a question we are considering at the moment with the Australian Dairy Farmers and the Australian Dairy Products Federation”.
Fonterra general manager of milk supply Matt Watt disputed the claim by the UDV and said it had made it clear the opening for the next season was $5.30kg/MS — a price reflective of the current market and improved product mix and “what we can earn in it”.
“We have also been clear that our 40c kgMS additional payment will be paid on top of our opening and closing price, and will be itemised as a separate line item in our farmers’ statements,” he said.
“When coupled with our price, it means all Fonterra farmers will receive an average of $5.70kg/MS, with a forecast closing price range of $5.80kg/MS to $6.20kg/MS.
“The reason we’ve itemised it separately is to be very clear with our farmers that our base price is supported by our product mix and the market and the additional 40c kg/MS payment is funded through the strength of our business.”
Mr Watt also said farmers who have continuously supplied Fonterra since last season have the option to receive the 40c kg/MS upfront via application by the end of the month.
Those who have a FASL and choose to receive the money upfront will first have it applied to reduce the FASL debt, with the balance paid to them.
Those electing to receive the payment monthly are able to “use it as they choose through the season as received”.
Source: The Weekly Times
Link: http://www.weeklytimesnow.com.au/agribusiness/dairy/united-dairyfarmers-of-victoria-in-row-over-incentives/news-story/0e69db8f77e0dca69d8b55707d980b64
