IT’S still a few days out from the official start of the new milk season and already Murray Goulburn has come out with a revised opening price, up from the “shocking” $4.70kgMS announced on June 6 to a more palatable $5.20.
And they’ve acknowledged the need to be more competitive.
The fact is at 80c behind, they were facing a mass exodus of suppliers on July 1, if they didn’t move and while they’ve headed off the worst of it, they’re still trailing several of the main local players, including Burra Foods ($5.45) and Fonterra ($5.30 for new suppliers), leaving open the likelihood that some will still go.
MG supplier, Geoff Pate of Nyora, has welcomed the increase.
“Yes, it’s a little bit better but they are still behind the competition,” he said this week.
“We’ve got our financing through Murray Goulburn so we’ll be staying with them but they really need to be up with the others.”
Mr Pate says MG should also simplify its payment system and recommends doing away with the Flat Milk Incentive, allowing all farmers to get access to some of the better paying months.
“And waiting until July each year to get the incentive payment isn’t helpful either, it should be paid monthly. I’ve had to leave some people hanging out to get paid for the extra in July. It’s not fair.”
Mr Pate believes MG could shake up its marketing as well.
“They’ve got some good products but I don’t think they’re active enough with their customers or their marketing.”
Murray Goulburn announced the increase to the Southern Milk Region opening price last Thursday, June 22 as follows:
• An increase in the 2017/18 season opening Farmgate Milk Price (FMP1) to $5.20/kilogram of milk solids (kgMS) (including the Reward Program and other incentive payments);
• An increase in the higher end of the forecast 2017/18 full year FMP range to $5.20-$5.50/kg MS, up 10c on the June 6 announcement.
“The previous opening price announcement on 6 June 2017 was earlier than in prior years in order to try to assist suppliers with budgeting and business planning,” said MG last week.
“Since then, MG has had the opportunity to review the 2017/18 budget assumptions, which include dairy commodity prices, exchange rates and achieving cost out initiatives, as well as achieving milk intake of approximately 2.5 billion litres. The updated FMP has also taken into account improved commodity prices reflecting anticipated market returns, together with additional contracted sales.
“MG recognises that in the current competitive environment it needs to maintain milk supply and provide improved cash flow for suppliers. The decision to revise the opening price to $5.20/kg MS is intended to assist in maintaining competitiveness and support the supplier base.
• MG: $5.20/kgMS opening ($5.20-$5.50 projected)
• Fonterra: $5.70 (includes 40c loyalty payment not available to new suppliers – projected
• Burra Foods: $5.45-$5.65 (includes 40c three-year supply guarantee)
• Bega Cheese: $5.50 ($5.30-$5.70 projected)
• WCB: $5.50
Fonterra Australia opened on June 14 with $5.30 per kilogram of milk solids (kgMS) for season 2017/18, and upgraded its forecast closing range by 10 cents/kgMS to $5.40 to $5.80kgMS.
“When coupled with Fonterra’s 40 cents/kgMS additional payment, it means Fonterra farmers can expect to receive $5.70kgMS, with a forecast closing price range of $5.80 to $6.20kgMS,” Fonterra Australia Managing Director René Dedoncker. He said Fonterra had taken a responsible view in setting its opening price and forecast closing range which “reflects 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,” said René.
But Fonterra has received a mixed response from Victoria’s peak dairy body.
The United Dairyfarmers of Victoria praised the 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 40c 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 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.