Dairy giant Fonterra Australia will hold an urgent meeting with its milk farmers today, to address the financial ramifications on its own coffers of the decision by rival processor Murray Goulburn to scrap its attempted clawback of $183 million in milk price “overpayments” from farmers.
Fonterra chief executive Rene Dedoncker has summonsed directors of its farmer milk supplier body, the Bonlac Supply Company, to Melbourne this afternoon to discuss the potential $60m fallout for Fonterra from Murray Goulburn’s backflip.
Fonterra is legally obliged under a 2012 milk supply contract — known as the Bonlac supply-agency agreement — to match or better the farm milk price paid by Australia’s biggest dairy group and price setter, Murray Goulburn, at all times.
This week’s MG announcement effectively adjusts the average milk price the company paid its farmers for the 2015-16 financial year significantly upwards to $5.53 a kilogram of milk solids (42.5c a litre of milk), now it has “forgiven” farmers their so-called debt or clawback obligations.
The move leaves Fonterra — which followed MG downwards in slashing its milk price in April 2016 — now having to legally pay an extra 3.5c a litre for every drop of the 1.7 billion litres of milk its farmers supplied during 2015-16.
At stake for Fonterra is a potential extra milk bill of about $60m, with its 1400 Australian milk farmers each poised to receive an average $45,000 cheque in the mail as a consequence of MG’s change of heart over its April 2016 milk price crash.
Fonterra farmers yesterday vowed to pursue legal action against the NZ processor if Mr Dedoncker does not commit to pay the full $50m-$60m now owing to milk suppliers.
“I just hope Fonterra does the right thing; the supply agreement … is very clear,” Colac dairy farmer Mark Billing, a director of the Bonlac Supply Company, said yesterday.
“But it’s frustrating too,” Mr Billing said.
“We’ve had this year of pain, of anguish, of farmers being forced off their farms and having to cull cows because of the low prices being paid … and yet now the prices (2015-16) are back (to where they were) before this crash all started.”
http://www.theaustralian.com.au/business/companies/fonterra-in-urgent-pricing-talks-with-dairy-farmers/news-story/5443180ea2f62ff91d4a22320ec2f4ce