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Fonterra follows Murray Goulburn lead and slashes milk prices

Australian dairy farmers received another blow yesterday as dairy processor Fonterra cut the price it pays suppliers by more than 10 per cent.

The company said in a statement that it had revised its farmgate milk price from $5.60 per kgMS to $5.00 per kgMS for the current season.

Dairy farmers, who are still coming to terms with last week’s decision by the country’s largest dairy processor Murray Goulburn to cut its farmgate milk price from $5.65 to a low of $4.75 kgMS, will not be happy with Fonterra’s decision.

“The price change better reflects the reality of the supply and demand imbalance that is affecting global dairy commodity prices, compounded by the recent strength of the Australian dollar,” the statement said.

Fonterra Australia managing director Judith Swales told the Australian had been warning farmers that the price was high since last August.

“We’ve been trying to send a signal since August to our farmers — and since then global commodity prices have dropped further — so hopefully this is not too much of a surprise,” Swales said.

“We have always advised caution to our farmers; we absolutely flagged a (price rise) wouldn’t happen at the end of this year, but to expect a step down.”

Fonterra Australia is also offering its suppliers an interest-bearing support loan of up to 60c per kgMS that is linked to a supply commitment and is repayable from FY18.

United Dairy Farmers of Victoria president Adam Jenkins was not happy with the price cut.

“We understand Fonterra was trying to be transparent … but to then slash the price as far down as Murray Goulburn went and in the same week is unacceptable; it smells of opportunism,” he told the Australian.

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