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.
The co-op has just announced an A13c lift in farmgate mlk price to Australian farmers, taking the average payout to A$5.98/kgMS or NZ$6.56/kgMS.
It has also cut the top end of forecast closing milk price range in Australia by to A$6.10kgMS (NZ$6.69) for the 2018/19 season.
The announcement came on the same day as NZ farmers face a milk price drop of up to 50c/kgMS. Fonterra’s NZ suppliers can expect a forecast payout of $6.25 to $6.50/kgMS, down from $6.75/kgMS announced last month.
Fonterra’s Australian suppliers are not shareholders like most NZ suppliers.
Fonterra Australia managing director René Dedoncker says the A13c increase will help support its farmers who are facing challenging conditions.
“Rising costs for feed and water due to the drought means that cashflow is even more critical for our farmers. Receiving this increase in their milk payment now, rather than later in the season, will help our farmers make important decisions on input costs and plan for the remainder of the year.
“This milk price is reinforced by our strong Australian business which is performing well and generating repeatable returns, and is supported by tightening domestic supply of milk and the weakening Australian dollar.”
However, Dedoncker also noted that market conditions were putting downward pressure on the upper end of the forecast range announced in May.
“A weaker currency has only partially offset the impact of an increase in production this season in some other dairy-producing countries.”
