Mixed response to Fonterra milk price

June 22, 2017

Fonterra’s opening price announcement garnered a mixed response from Victoria’s peak dairy group.

Fonterra’s opening price announcement garnered a mixed response from Victoria’s peak dairy group.

The United Dairyfarmers of Victoria praised a strong opening price of $5.30/kg milk solids, but criticised the processor and Bonlac Supply Company for public statements indicating a higher available opening price of $5.70/kg MS.

The higher price comes from a 40¢ loyalty payment borrowed from future earnings as a way of compensating existing, retiring or recommencing suppliers for a disastrous 2015-16 season.

UDV president Adam Jenkins said the dairy group demanded both companies be transparent in setting their opening price and promoting it to suppliers.

‘‘Fonterra has publicly announced an inflated opening price which does not reflect the current market price and is not available to new suppliers,’’ he said.

‘‘The comments are nothing but misleading, and at a time when the dairy industry has committed to rebuilding trust along the supply chain, they are unhelpful in our effort to create a transparent milk price for the dairy industry.’’

Mr Jenkins said the statements showed inconsistencies in behaviour by Fonterra and BSC after neither company recognised the benchmark return set by Murray Goulburn last year at $5.53/kg MS.

‘‘Fonterra wants to give the appearance that they are offering a more attractive price than any of the other processors at $5.70/kg MS, but it’s simply not true and Fonterra and BSC need to make that clear.

‘‘Our industry landed in a very dark place 18 months ago for not reflecting the true market price in the farm gate returns and we do not want to land there again.’’

Fonterra Australia managing director René Dedoncker said Fonterra had taken a responsible view in setting its opening price and forecast closing range, which reflected Fonterra’s Australian improved product mix and the current commodities market.

‘‘This is a responsible price in the current market. World dairy prices have strengthened, reflecting the strong fundamentals supporting global dairy markets,’’ Mr Dedoncker said.

‘‘We’ve made significant investments in Australia and achieved a number of milestones for our business, including our multi-million dollar cheese plant at Stanhope, expanded capacity at our Cobden and Wynyard plants, and commencing our joint venture with Beingmate at Darnum.’’

Mr Dedoncker said he believed the opening price would enable farmers to plan ahead and position their businesses to grow if they chose to do so.

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