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.
Fonterra commits to fund Dairy Australia: Farmers applaud Kiwi giant
Dairy farmers have applauded trans-Tasman dairy giant Fonterra’s commitment to pay a “proportionate financial contribution” to Australia’s research and development corporation – Dairy Australia
Australian Dairy Farmers president Rick Gladigau said Fonterra’s commitment “was a very positive step” and it “is a fantastic and timely example for all dairy processors to consider”.
Federal Agriculture Minister David Littleproud said “if the dairy industry is unified about wanting a processor levy, I am prepared to work with the industry to explore the options.”
Labor agriculture spokeswoman and Tasmanian MP Julie Collins failed to respond.
Fonterra Australia managing director René Dedoncker said “we support the notion of processors making meaningful contributions – both financial and time – to ensure that Dairy Australia has the resources it needs to address the industry’s priority areas, and we commit to making proportionate financial contributions.
“This is not a once-off, short-term contribution. As a major processor, we are committed to setting up a long-term co-investment arrangement which needs consultation and alignment.”
Farmers, who contribute $31m in levies on their milk to DA each year, have been appealing to processors for months to chip in about $5m to cover half the R&D body’s post farmgate work in promotion, manufacturing research and market access.
Fonterra Australia’s share of that $5m would equate to about $900,000, based on it bringing in 1.4 billion litres this season as part of the 8.8 billion-litre national milk pool.
On that same basis Saputo would contribute $1.27m, Bega Cheese $970,000, Lactalis about $450,000, Bulla $340,000, while Burra and ACM each chipped in about $230,000, plus $130,000 from NORCO, leaving about $470,000 to be recovered from smaller players.
Neither Bega Cheese nor Canadian giant Saputo responded to repeated calls, texts and emails on whether they supported making a direct contribution to DA, via a mandatory processor levy.
Mr Dedoncker said Fonterra preferred a voluntary levy, but said “it’s too early to say what our financial contribution will be, as the next step is to work with Dairy Australia to align on priorities for co-investment, while making sure appropriate governance and accountabilities are in place to transparently report the benefits of our contribution”.
Fonterra’s commitment follows last week’s announcement of the Dairy Levy Poll results, in which an overwhelming majority of farmers voted to oppose any increase in their levy payments to DA.
As the nation’s peak dairy lobby group ADF called on its 5000 farmers to oppose an increase, given processors ongoing failure to contribute.
Yet as things stand dairy processors contribute virtually nothing to Dairy Australia, but are granted a seat on its board and its selection committee, are listed as Group B shareholders and were even represented on the advisory committee that recommended lifting farmers’ DA levy contributions by 20 per cent, from $32 million to more than $38m.
Fonterra pays NZ farmers record milk price
Fonterra New Zealand has lifted Kiwi farmers’ milk price to a new record. And Aussie farmers are asking what it means for them.
Kiwi dairy giant Fonterra has lifted the 2021-22 forecast milk price paid to its New Zealand farmers by 50 cents to a new mid-point of NZD $9.20 per kilogram milk solids.
The move is set to capture the attention of Australian farmers keen to know if Fonterra’s Australian arm will follow its parent company’s lead.
As it stands southeast Australian dairy farmers are being paid about $7-$7.30/kgMS in Australian dollars, equal to about NZD$7.40-$7.70.
A Fonterra Australia spokeswoman said at this stage the company was sticking to its current schedule and would not be reviewing Australian farmgate milk prices until next month.
The Weekly Times is trying to contact other local milk processors for comment.
Fonterra NZ’s decision follows a tightening of global supply dairy supplies, which lifted last week’s Global Dairy Trade index to 1397, a level not seen since March 2014.
The NZ Fonterra Co-operative Group issued a statement today declaring it had lifted this season’s forecast farmgate milk price range from NZD $8.40-$9.00/kgMS to NZD $8.90-$9.50 per kgMS, up from NZD $8.40-$9.00 per kgMS.
It’s the highest price Fonterra has ever paid farmers, since it was formed in October 2001.
NZ Fonterra chief executive Miles Hurrell said the price lift was “the result of consistent demand for dairy at a time of constrained global milk supply.
“In general, demand globally remains strong – although, we are seeing this vary across our geographic spread.
“Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs.
“It’s a similar supply picture in New Zealand. Earlier this month we reduced our forecast milk collections for 2021-22 from 1525 million kgMS to 1500m kgMS due to varied weather and challenging growing conditions.
“While the higher forecast Farmgate Milk Price does put pressure on our margins in our consumer and foodservice businesses, prices in our ingredients business are favourable for milk price and earnings at this stage. As a result, we remain comfortable with our current 2021/22 earnings guidance of 25-35 cents per share.”
Mr Hurrell said there are a number of factors the Co-op is keeping a close eye on, including growing inflationary pressures impacting on operational costs, the increased potential for volatility as a result of high dairy prices and economic disruptions from COVID-19, particularly as governments respond to the .rapid spread of the Omicron variant.
GDT results from last week show butter prices have risen from US$4458 in July last year to US$6158 last week.
Whole milk powder have also risen by 5.6 per cent in the two weeks leading up to last Tuesday’s auction, while skim milk powder jumped 5 per cent.