Dairy processors on the lookout for suppliers

Driven by the purchase of Murray Goulburn Co-operative by Canadian processing giant Saputo, and factory expansions by Fonterra, Australian Consolidated Milk and Freedom Foods, Rabobank senior dairy analyst Michael Harvey said suppliers needed milk more than ever.
The fall of the co-operative had opened up a new period in the industry with more supplier shifts and less loyalty, Mr Harvey said.
‘‘Farmers were very loyal to the co-op and are not as loyal to any other type of processors,’’ he said.
‘‘The theme is a lack of milk supply in the system, there’s a lot of stainless steel not being used.’’
With Saputo racing to make up the inherited shortfall in milk supply — its current processing levels have one billion litres of additional capacity — the competition for supply is leading to industry changes.
‘‘You’re already seeing a lot of the price announcements coming out,’’ Mr Harvey said.
‘‘Now, they may not be where they finish and might not be that attractive, but … they’re going earlier to market and offering longer-term contracts all because they’re trying to secure milk supply.
‘‘You’ve got a whole heap of companies that in the past wouldn’t have gone to market until Murray Goulburn … now everyone is waiting for Saputo because they’re the biggest player yet to go to market.’’
The assault has been taken to all corners of the region, with processors including Saputo and Bulla taking out full-page newspaper advertisements in an attempt to draw new suppliers into the fold.
For Katunga dairy farmer Daryl Hoey, this year’s supply battle is certainly more public than in previous years.
‘‘Previously it’s probably been more one-on-one, driving down a driveway,’’ Mr Hoey said.
‘‘(But) farmers are looking for a sustainable milk price going forward … There’s always been movement (between suppliers) but that’s probably grown in the past two years and some people have made it very clear they’ll be looking elsewhere.’’
While there were hopes the competition would lead to increased farm gate milk prices, Mr Harvey said costs such as fodder and water continued to climb, impacting the gains that would result from an increased milk price.
The milk battle comes as a group of 20 northern Victoria dairy farmers have so far secured 100million litres of milk supply with the intention of taking the collective milk pool to processors and bargaining for a higher milk price.
UDV president Adam Jenkins said ultimately, dairy farmers needed early and transparent opening prices to budget for the year ahead.
‘‘Farmers are desperate for certainty and it is simply unacceptable, especially considering the challenging conditions of the past two seasons, for processors to stall or misrepresent their opening price announcements,’’ Mr Jenkins said.
By: Alana Christensen
Source: Country News
Link: https://www.countrynews.com.au/@dairy/2018/06/19/125099/competition-hot