Fonterra, Saputo announce prices within days of each other

By Dairy News

FONTERRA HAS announced an opening price of $5.85 per kilo of milk solids for the 2018–19 season and a forecast closing rage of $5.85–$6.20 kg/MS.

The New Zealand-based processor announced the opening price 10 days out from the opening of the season — two days after Saputo announced its opening price of $5.75c/kg.

Saputo did not release a forecast closing price, telling suppliers it would “update you as part of our quarterly milk price review process in October, January, April and June.”

Fonterra also announced it would increase its farmgate milk price for the current 2017–18 season to $5.68/kg MS, plus the 40c kg/MS sign-on bonus, for a total cash payout and forecast average closing milk price of $6.08 kg/MS.

The increase will apply from July 1, 2017 and will be paid on July 15.

Fonterra Australia Managing Director René Dedoncker said next season’s price “reflects what the company can earn in the market”.

“Our opening and upgraded forecast closing range are based on a continued positive global supply and demand outlook, coupled with more favourable currency movements.

“Demand is expected to remain strong — especially from China for milk powders and Japan for cheese, as well as butter and AMF globally — and the global dairy market’s current strong prices are expected to continue throughout the new season.

“Since our last price review, we have achieved positive sales in key cheese export markets, GDT remains at supportive levels, and the short-term weakness in the Australian dollar has given us confidence to update our forecast closing range.”

In its letter to suppliers, Saputo Dairy Australia wrote that its opening price “represents our current assessment of expected market conditions for the coming year”.

“We believe it is responsible and allows room for upward movements if improved market conditions are realised throughout the year.”

It added: “We are pleased to report that market conditions have continued to improve in recent months.”

Bega Cheese also announced its opening milk price of $5.85 kg/MS. The co-op had planned to maintain its current price until September but announced its opening price less than a week after Saputo.

Bega is also offering an additional upfront payment of 25c/kg MS if they sign for two years or 50c/kg MS if they sign for three.

Australian Consolidated Milk increased its opening price from $5.90 kg/MS to $6 kg/MS.

Lion Dairy & Drinks and Dairy Farmers Milk Co-operative will offer farmers anywhere from $5.82 kg/MS for a variable contract to $6.10 kg/MS.

Koondrook Fonterra supplier Skeeta Verhey said the opening price was a “start” and the closing price range of $5.85 to $6.20 kg/MS was “competitive” for his business.

“It’s north of where we were last year,” he said.

Australian Dairy Farmers national councillor Daryl Hoey said companies were being “conservative” because of where the industry had been.

“It’s probably not outside of the realms of the expectations of where it would be — but we were hopeful it would be higher,” Mr Hoey said.

“The companies being conservative is reflective of where we have come from.”