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.
He says the 50c lift in the forecast milk price mid-point would have put a smile on every face in the dairy sector.
Zonderop was scanning cows on his farm and had not seen the email from Fonterra on the forecast milk price increase when Dairy News contacted him for a comment.
He knew that Global Dairy Trade prices, especially whole milk powder prices, had been rising steadily.
Zonderop believes Fonterra farmers will be using the extra cash to reduce debt and in some cases upgrade and replace machinery.
But debt reduction is key, he notes.
“The high interest rates, cost creeps and rate of inflation have resulted in more debt and overdrafts for many of us.
“Now it’s time to get things out of the road and debt is the key one.”
Zonderop notes that December is a busy month on dairy farms: farmers need to pay for making silage, mating cows and pay for bulls.
“We can now pay them off will within a month,’ he says.
Fonterra chief executive Miles Hurrell says the co-op is committed to providing farmers the highest sustainable milk price.
“We’re seeing a recovery of demand in Greater China as domestic milk production rebalances and demand from Southeast Asia continues to be strong.
“Looking at supply, milk production out of the US and Europe continues to be impacted by local factors, while production out of most regions of New Zealand has increased.
“We’re continuing to monitor factors that may influence global supply and demand dynamics, including any potential impact from heightened geopolitical uncertainty,” says Hurrell.
Fonterra’s forecast earnings for FY25 remain unchanged at 40-60 cents per share.
“Our forecast earnings range reflects an expectation our underlying operating profit will be stable as we offset the higher cost of milk in the second half of the financial year through improved sales volumes, product mix and pricing. It also reflects the change in Fonterra’s tax status,” says Hurrell.
Fonterra isn’t the only milk process to lift its forecast milk price.
Taupo-based Miraka has raised its base Milk Price mid-point to $9.60/kgMS and a range of $9.10 to $10.10/kgMS.
Miraka general manager, on-farm excellence Joan Barendsen says their dairy farmers work hard to be industry- leaders when it comes to milk quality, kaitiakitanga and animal welfare.
“We’ve come out with a strong milk price update to underpin their efforts and commitment to farming excellence.”
Dairy farmers who supply milk to Miraka can earn an additional premium of up to $0.20/kg/MS under the company’s on-farm excellence programme, Te Ara Miraka.
Miraka has paid more than $25 million in premiums to milk suppliers since 2015.
