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.
It follows a 25c lift in the milk price for New Zealand farmer shareholders on Thursday to $6.75/kgMS.
Fonterra suppliers in Australia don’t own shares in the co-op and are members of Bonlac Supply Company, which negotiates the supply agreement with Fonterra on behalf of suppliers.
Fonterra’s Australian farm gate milk price is now A$5.50/kgMS. The increase will has been backdated to July 1 and paid on August 15.
Fonterra’s additional payment of A40 cents/kgMS is payable on top of the revised farmgate milk price, and brings the total average cash paid to A$5.90kgMS.
Fonterra Australia Managing Director René Dedoncker says that improved market conditions and the strength of the Australian business supported this step up.
“Since the start of this season our milk pool has grown, and our assets are nearing optimal capacity,” said Dedoncker.
“Coupled with strong demand from Fonterra’s Australian and global customers, this has enabled us to deliver this step up to our farmers.
“This price increase will improve cashflow positions on farm, reinforcing growing confidence of our farmers.”
Fonterra has also updated its forecast closing milk price range, to A$5.50 to A$5.80kgMS, and noted that while commodity prices are strong, the rally in the Australian dollar was likely to influence the end of season milk price within that forecast range.
“We continue to monitor currency movements closely and will keep our farmers updated throughout the season with the latest market conditions.”
