Prolonged drought in Australia and a downturn in agriculture in the US and Ukraine are affecting the European farm machinery sector.
Lino Saputo Junior, the chairman of Canadian dairy giant Saputo, told the Australian Dairy Conference this morning that co-ops have to show more leadership on this issue.
He urged co-ops to follow milk consumption patterns around the world.
“To improve the economics of dairying we need some leadership at the co-op level in the US, Europe and Oceania whereby they are not adding capacity and in order to fill that capacity they are urging suppliers to increase their milk production.
“Because somewhere along the line you will try to sell those solids (milk solids) and if you can’t sell those solids the prices will be depressed,” Saputo Junior says.
“And if prices are depressed you can’t pay a high price for those solids; it’s very simple.”
Saputo is a listed dairy processor with annual sales of $12 billion. It owns Warrnambool Cheese and Butter Company in Victoria since 2014 and is seeking regulatory approval to buy troubled Australian co-op Murray Goulburn.
If the MG sale is approved, Saputo will leapfrog Fonterra and become Australia’s biggest milk processor.
Saputo Junior noted that Canada has a milk supply management system with very little price volatility.
He says milk suppliers need to be protected from price volatility.
“I’m hoping somewhere along the line there will be some common sense and some discipline that comes into this industry from the major co-ops in the US, Europe and NZ.
“Ultimately they must look at the best interest of the supplying community; first and foremost
“And if they do that effectively then the economics will be much better in the system; there just has to be the right balance.”