Fonterra shaves 50c off forecast milk price
Fonterra has dropped its forecast milk price mid-point by 50c as a surge in global milk production is putting downward pressure on commodity prices.
Ian Gibb, of Australian consultancy firm Farmanco, says Bonlac Supply Company (BSC) farmers were paid the highest milk price in Victoria and Tasmania for most supply patterns in the 2013-14 season.
Bonlac farmers supply Fonterra Australia.
Bonlac and Fonterra have a supply agreement under which Fonterra must pay a milk price at least equal to Murray Goulburn.
Bonlac every year commissions an independent audit of milk price paid by Murray Goulburn. This year it audited all major processors in north, east and west Victoria and Tasmania.
Milk prices were compared with Murray Goulburn, Warrnambool Cheese & Butter, Tasmanian Dairy Products, Burra Foods, Longwarry Food Park and Tatura Milk Industries (TMI).
The study reviewed milk supply patterns for a seasonal calving herd and the typical flat supply pattern of a herd with multiple calvings. Each pattern was then scaled to 80,000kgMS, 160,000kgMS and 320,000kgMS – representing, respectively, farms small (150 cows), medium (300) and large (600).
Bonlac and Fonterra Milk Australia was found the price leader in most regions for most supply patterns, but not to seasonal farms in the north, east and west where TMI, Burra and WCB, respectively, came out ahead, and the flat supply farms in the west, where WCB was the price leader.
Gibb says in competitiveness BSC can claim to have been price leader in most regions for most supply patterns. “Farmers know milk price is a driver of profit, but from a farm business management perspective the focus should be on profit, not price alone.”
BSC chairman Tony Marwood says it has a responsibility to its supply base to ensure this leading milk price is achieved and that BSC Fonterra suppliers have a clear view on the price paid for the 2013-14 season.
“The outcome of this report is good news and validates what we said all season,” Marwood says. “It shows that all our suppliers to Fonterra received at least a competitive price and in some cases even better for the 2013-14 season.
“The 2013-14 season produced record high prices, whereas this season we’re experiencing lower prices because of a challenging market and volatile conditions.
“It’s important that our suppliers focus on what they can control – farm inputs and managing margins – to manage through the cycle and ensure a profitable, sustainable business.”
