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 company lifted its forecast base milk price by a whopping $1.25 on the back of soaring global dairy prices.
Synlait chief executive Grant Watson, who started in his new role this month, says dairy commodity prices have strengthened significantly as strong global demand has outrun restricted supply.
“The New Zealand milk price is also benefiting from a weakening New Zealand dollar against the US dollar,” he says.
Watson expects dairy prices to remain strong for some time.
He notes that as seen in most commodities, Covid is having a significant impact as illness and lockdowns impact production and supply chains. This has been amplified by rising production costs driven by strong inflation and ongoing pressure on our industry to decarbonise.
“As a result of this ongoing demand Synlait believe dairy commodity prices could remain high for some time as these dynamics will take time to unwind, supporting the record milk price forecast.”
Watson says Synlait will continue to monitor movements and keep its farmer suppliers updated. Its next milk price announcement will come in May.
The strong commodity dairy prices mean all NZ farmers are in line for a record payout this season.
Fonterra has announced a forecast milk price range of $8.90 to $9.50/kgMS with a midpoint of $9.20/kgMS. Its previous record milk price - $8.40/kgMS- was paid in 2013/14 season.
Open Country Dairy will this month pay its farmer suppliers a record $9.01/kgMS for milk supplied in November and December.
