Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
Supplier and former Federated Farmers dairy chair Willy Leferink says a forecast milk price 10c higher than Fonterra's mid-point and market-based advance rate have given farmers new hope.
Synlait is also talking about a new loyalty programme and Leferink says farmers are looking forward to the details. But Leferink says farmers are waiting for a good business plan from Synlait once the special meeting to recapitalise the business is held later this week.
"We will be keeping a close eye, and I may even be attending the meeting," he told Dairy News.
Leferink isn't surprised by the recapitalisation plan, which will see the company's two biggest shareholders Bright Dairy and a2 Milk inject cash into the debt-laden dairy and infant formula maker.
The plan will go before a special meeting scheduled for September 18. Under the plan, a2 Milk will end up retaining its current shareholding (19.8%), while Bright Dairy's ownership will increase from 39% to 65.25%.
The two companies will control around 85% of Synlait's voting capital, with retail shareholders' share declining from around 41% to 15%. This has angered some smaller shareholders, including founder John Penno.
However, Leferink says he's more relieved now than he was a few months ago.
"There was strong indication that Bright Dairy was not going to let the business collapse," he says. "I know not everyone is happy."
Leferink says farmers were worried a2 Milk "had a desire to play poker" when it came to Synlait's future.
"We wanted them to sit around the table and sort it our and they did."
This month Synlait lifted its 2024-25 forecast milk price by 60c to $8.60/kgMS and committed to a competitive advance rate profile for farmers.
Synlait director on-farm excellence, Charles Fergusson, told Dairy News the advance rate is 75% of the forecast price and rises to 85% early next year.
Fergusson says Synlait is aware of the challenges its farmers have been facing as the company has been "off the pace when it came to advance rates".
"Farmers have been very clear to us, they wanted us to step up. So we are happy to do that."
Fergusson says this week's vote, if successful, should help repair the company's balance sheet and further help in delivering a competitive milk price and advance rate.
Synlait says despite the lift in the forecast price, it continues to take a conservative approach to its 2024-25 forecast, given the exposure to volatile future global dairy commodity prices at the beginning of the season. Retention of Synlait's milk supply remain a critical priority for the company.
Fergusson says Synlait is committed to delivering a competitive milk price and advanced rate profie to ensure the company's on-farm offering remains attractive to farmer suppliers.
"Synlait will continue to monitor future forecast movements and update farmer suppliers as needed."
The final milk price for the 2023-24 season will be confirmed when the company's full-year result is released on 30 September.
