Battle for milk
OPINION: Fonterra may be on the verge of selling its consumer business in New Zealand, but the co-operative is not keen on giving any ground to its competitors in the country.
It was also announced that Fonterra will be reimbursing the interest charge for the Fonterra Australia Support Loans package that was included in this season’s milk price to all current suppliers.
“We believe this payment is the right thing to do and we’re committed to ensuring our farmers are better off by partnering with us,” says Fonterra Australia managing director René Dedoncker.
The Australian dairy season commences July 1; Fonterra says it will announce its opening payout for the season in the coming weeks.
Dedoncker says its business is in a stronger position, which underpinned its competitive forecast full year range based on current currency exchange rates and commodity market conditions.
“Providing Fonterra’s forecast full year price range now is aimed at giving our farmers guidance so that they can plan for next season with confidence,” says Dedoncker.
“We’ve invested in world-class assets, improved our product mix, and exited non-strategic businesses. This coupled with the rebalancing of global supply gives us the ability to pay a competitive milk price to our farmers.
“A competitive price supports our investments, helping us to utilise the re-built capacity at Stanhope, capture global demand, and ultimately deliver higher returns to our Australian farmers and our owners.”
Fonterra was under pressure to fork out an extra A$60 million to its 1500 farmer suppliers in Australia this season.
Australia’s largest processor, Murray Goulburn this month scrapped its attempted clawback of A$183m in milk price 'overpayments' from farmers.
MG's announcement effectively adjusts the average milk price the company paid its farmers for the 2015-16 ¬financial year significantly upwards, from A$4.95/kgMS to A$5.53/kgMS. Fonterra’s milk price for the current season is A$5.20/kgMS.
Fonterra is legally obliged under a 2012 milk supply contract — the Bonlac supply-agency agreement — to match or better the farm milk price paid by Murray Goulburn, at all times.
Dedoncker says Fonterra considered Murray Goulburn’s recent announcements including the decision to forgive its milk supply support package.
Last week Fonterra held talks with Bonlac Supply Company which represents Fonterra’s 1500 suppliers in Australia.“We consulted with Bonlac on the best way to respond to our suppliers,” says Dedoncker.
