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Milk price comparison: Fonterra beats Bega and Saputo

Fonterra leads on farmgate price ahead of rivals Saputo and Bega, but all dairy processors are struggling. See the latest milk price comparison.

New Zealand dairy giant Fonterra has beat its major rivals to top the milk price pool, despite embattled Canadian processor Saputo’s recent 10-cent step up.

Milk2Market’s latest milk price comparison has Fonterra offering $9.52 a kilogram of milk solids for farmers delivering two million litres, followed by Bega Cheese on $9.45/kgMS, with Saputo on $9.40/kgMS.

Competition among processors for farmers’ milk was already strong heading into this season, but La Nina-driven floods and heavy rain swamped pastures and drove national milk production down 6.5 per cent to the end of October.

If the trend continues Australian dairy farmers will produce just 7.99 billion litres this season, compared to 8.55 billion in 2021-22 and 9.8 billion seven years ago.

Processors have not been able to run their processing plants at anywhere near capacity and have also been hard hit by the global energy crisis.

Diesel price hikes have driven up transport costs, while gas, used in evaporators to make milk powders, has soared to record levels.

While Saputo, Bega Cheese and Fonterra negotiate their own contract gas prices with suppliers, recently gazetted standard contract rates show AGL has lifted its weighted average small business tariffs by 22 per cent, Energy Australia by 35.9 per cent and Alinta Energy by a whopping 67.9 per cent.

Saputo has already rationalised its transport fleet and announced the closure of its Maffra plant and its bulk powders production at Leongatha, both of which use huge amounts of gas in their evaporators.

Source: Peter Hunt, The Weekly Times, 8 December 2022

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Andrew Forrest buys $108m slice of Bega Cheese

Mining billionaire Andrew Forrest has bought a significant share in Bega Cheese, extending his food empire even further. 

Key points:

  • The iron ore magnate buys 6.6 per cent of Bega Cheese worth $108m

  • While Bega shares rise 5 per cent, the year ahead could be challenging

  • There is talk of Bega launching a takeover of Fonterra's Australian operations

One of his companies, Tattarang AgriFood Investments, purchased more than 20 million shares in Bega Cheese this week for about $108 million.

 

It gives him a 6.6 per cent share of the dairy company and makes him its fourth largest shareholder.

Just a week ago Bega Cheese shares fell 10 per cent off the back of a rocky forecast for next year.

It reported in a statement to the stock exchange that the impact of the pandemic had been "extensive and significant".

 

This was due to lockdowns, factory shutdowns, increased safety and testing requirements, major cost increases and shortages across the supply chain, it said.

 

There had also been changes in key markets like China affecting the sales of infant and toddler dairy products.

 

But the company's share price was up 5 per cent on the final day of the year, and 33 per cent over five years, emphasising its successful transition from a farming cooperative into something the nation's richest people want to be involved in.

Why is Forrest getting into dairy?

Australia's second richest man, Mr Forrest has been diversifying his assets beyond the massive iron ore operations where he made his wealth.

 

He has bought shares in aquaculture, alternative foods, several large cattle properties and bought the iconic Australian clothing company RM Williams in 2020.

 

He also owns significant property assets and is involved in major new hydrogen projects. 

Dairy farmer welcomes investment

One of Bega Cheese's original shareholders is farmer Phillippa Russell — the family property was one of the first farms that established the former cooperative in 1899. 

Ms Russell said "it's a good thing" to see Mr Forrest taking a stake in the company.

"He's showing his confidence in agribusiness and food products."

 

The higher share price was also a nice new year surprise for shareholders, she added. 

 

"A lot of mum and dads out there own Bega Cheese — it's still an Australian company. I'm very proud of it and I think it's still got a long way to go."

Does Forrest have an eye on Fonterra?

There is speculation that Bega could launch a takeover bid for the Australian arm of New Zealand dairy company Fonterra.

 

Analyst Jonathan Snape from Potter Bell looked at the potential for a deal, noting that Fonterra's milk supply had shrunk by 30 per cent over three years and it lost $1.8 billion from its Australian operations last financial year. 

 

Fonterra announced recently it was turning its attention back on its New Zealand operations. 

 

In his report, Mr Snape said Bega would have to borrow to pay for an offer for Fonterra but that it was an attractive deal because it would enable it to regain control of the Bega Cheese brand which had been sold to the NZ dairy giant.

 

"Bega has a strategy to own iconic brands, and the opportunity to repatriate the Bega brand, while adding Western Star, would have to be compelling."

 

More broadly, the dairy industry has made a big turnaround after some tough years, so it is not surprising that Mr Forrest is taking a slice of what could be a tasty pie in the next few years.

 

Source: ABC Rural, David Claughton, 31 December 2021

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