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.
United Dairyfarmers of Victoria president Adam Jenkins says the industry wanted profitable growth and would benefit from earlier forecasts of prices.
“We understand the market is volatile and everyone’s cautious, but we should get earlier notice,” he says.
“It is tricky because anything could happen in a month or so before the opening price, but an indication of a 12-monthly rolling average would be good for our businesses. It would help with planning.
“We’re generally autumn calvers in Victoria and you’re finishing off the last season’s pricing and then you’re not sure what the system looks like heading into the next season. As soon as you get a clearer line of sight you can make on-farm decisions.”
Fonterra last month said its opening average farmgate milk price would be NZ$6.30/kgMS for its Australian suppliers, who don’t own shares in the co-op. In May Fonterra announced an opening forecast price of $5.25/kgMS for its New Zealand farmer shareholders.
Fonterra is also forecasting an average closing farmgate milk price range of NZ$6-$6.83/kgMS for Australian suppliers this season.
Fonterra competes with Australian dairy co-op Murray Goulburn and foreign-owned processors Lion and Saputo for milk. Unlike NZ, where Fonterra dominates the market, in Australia MG, the biggest player, is the price setter.
Murray Goulburn last month also announced an opening forecast price of NZ$6.30/kgMS. The MG price for the southern milk region was forecast during its share offer at the start of May and farmers want those earlier predictions to continue.
South Australian Dairy Farmers Association president David Basham says that under their current mode of operation it would be difficult for processors to announce prices earlier, but he supported the call for lead-up predictions.
“Murray Goulburn this year with their capital raising said where they hoped the price would be and it hasn’t changed. Farmers are usually guessing until this point; there should be some predictions about what’s coming.”
McCartie says having earlier notice of likely prices would help farmers.
“The earlier we see those figures the better for everyone’s planning,” she says. “A lot of us are dealing with banks who want to know what’s happening. The more planning we can have, the better it will be.”
