What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
“A competitive milk price doesn’t just happen,” he told the Fonterra annual meeting in Lichfield yesterday.
He reminded the 400 shareholders at the meeting that last year’s farmgate milk price was $6.69/kgMS, third highest in a decade.
Sales outside the Global Dairy Trade (GDT) platform added 10c/kgMS to the payout last year; GDT sales account for 42% of milk price auction.
The combination of these sales and Fonterra’s ability to keep milk price costs below the rate of inflation, equates to an additional $750 million paid to farmers every year in higher milk prices, says Monaghan.
Monaghan pointed out that there had been a “structural change” in local milk prices since Fonterra was formed.
“We’ve gone from being paid about half as much as our global peers to the point now where we are consistently paid the same or thereabouts.
“It sounds arrogant to say it, but the fact is that simply never would have happened without a strong Fonterra.
“For a time this year, NZ farmers were paid the highest milk price in the world.”
A higher milk price poses a challenge to Fonterra’s ingredients and consumer and foodservice businesses; they were competing on price against US and European dairy giants that had lower input costs.
