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, with milk plants in Canterbury and Waikato, says it has taken a conservative approach to its forecasts given the exposure to future global dairy commodity prices, which are volatile in nature, at the beginning of the season.
The company is sticking to the 2023-24 forecast base milk price of $7.80/kgMS.
Synlait says its farmer suppliers have received, on average, $0.28/kgMS incentives above the base milk price for the last two seasons. The company is forecasting to pay similar incentives for the next two seasons.
“Forecasts are based on the best information available to Synlait at the time. Synlait will continue to monitor movements and keep farmer suppliers updated as required,” it says.
The final milk price for the 2023-24 season will be confirmed when the company’s full year result is released in September. The 2024-25 season forecast will also be updated at the same time.
Earlier this week, Fonterra announced as opening forecast range of $7.25-$8.75/kgMS, with a midpoint of $8/kgMS.
The co-op says milk supply and demand dynamics remain finely balanced and China import volumes have not yet recovered to historic levels.
“Given the early point in the season, the uncertainty in the outlook and ongoing risk of volatility in global markets, we are starting the season with a cautious approach,” the co-op says.
