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.
From June 2016, organic milk payments will reflect the performance of the organics business. Organic farmers currently receive a fixed premium together with the conventional farmgate milk price for their organic milk supply.
Organic farmers can choose to move to the new payment approach or stay under the existing payment system.
At a meeting with organic farmers this week, Craig Deadman, Fonterra's global business manager - Organics, told farmers that paying market-linked prices for organic milk recognises the improved performance of the organic business, which reflects greater demand and stable prices for global organic milk products.
"Organic milk products provide high-value returns for the cooperative. We want to grow our organics business over the long term. Linking the organic milk price to organic market returns will help us to increase the number of organic farmers."
Deadman says historically market prices for organic milk products have been less volatile than conventional milk price products and the organic milk price has the potential to provide farmers more certainty in operating their organics businesses.
He says the move also recognises the effort and commitment of Fonterra organic farmers to producing premium organic milk.
Deadman says Fonterra has undertaken a series of measures recently to enhance the attractiveness of organic farming for current and prospective organic farmers.
"A recent initiative is the establishment of the Organic Farmers Advisory Group, a representative group of organic farmers who provide an additional feedback channel between organic farmers and Fonterra. They also had provided feedback on the new organic pricing system," says Deadman.
