Synlait CEO Resignation Highlights Deeper Challenges Facing Dairy Processor
A revolving door of chief executives at milk processor Synlait is a warning sign, says Lincon University senior lecturer in agribusiness Nic Lees.
This follows Synlait lifting its 2024-25 season forecast milk price by 40c to $9/kgMS, the second highest milk price on record.
The listed company, now majority-owned by China's Bright Dairy, is battling to retain its 200 farmer suppliers in Canterbury following two years of poor performance and losses. Last month, the company approved a recapitalisation plan to meet debt commitments and improve its balance sheet.
Earlier this year, the majority of Synlait farmer suppliers handed in cessation notices, which take effect in two years. Cessations received in the immediately preceding year, up to the May 31 2024 cut-off date, would affect milk supply from 2026 onward if they are not withdrawn.
Synlait director on-farm excellence, Charles Fergusson, says farmers are happy with the $9 forecast milk price and the step up in advance rates during winter months.
"Definitely, there's been a significant change in the mood of our farmers. Last April-May, they were doing it really tough, but the lift in our forecast milk price and advance rate is a big step forward.
"We've had enquiries from some farmer suppliers who want to understand the process of removing the cessation notices," he told Rural News.
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Fergusson says he will be holding meetings with farmers this month.
Synlait's 200 farmer suppliers are based in Canterbury where milk production has been strong. The company also has 55 suppliers in the North Island; their milk is processed by Open Country Dairy.
Fergusson says the strong milk flows, along with easing cost pressures and the recent drop in the official cash rate (OCR) will help lift the financial performance of its farmer suppliers.
He says Synlait remains committed to delivering a competitive milk price, advanced rates and to ensure its on-farm offering remains highly attractive.
Fergusson says it's rare for processors to forecast a $9 milk price in mid-October. He points out that demand from China seems to be coming back and while milk flow in NZ is strong, global supply isn't improving.
