Burra Foods today announced it is offering the opportunity for Milk Supply Partners to lock in a percentage of their milk at a flat $6/kg milk solids Farmgate Milk Price (FMP) for the next three years.
Grant Crothers, Burra Foods Chief Executive Officer, said that the company is actively responding to the frustrations of Milk Supply Partners to FMP volatility. “The last 10 years has seen a significant increase in the volatility of dairy markets and the FMP, making dairying enterprises harder to manage,” he said. “Locking in a percentage of milk production at a fixed price of $6/kg MS provides income stability and a hedge against future volatility on a pre-determined portion of milk.”
Crothers believes it is an important step to promoting confidence for growth and investment on farm. “Fixing a portion of income can only increase confidence and provides a tool for Milk Supply Partners to better manage their business. It is part of a solution to income volatility, a topic that keeps many dairy farmers awake at night.”
Participation in the program is by application and Milk Supply Partners are to nominate the portion of milk solids they would like to ‘lock in’ during the three-year period, commencing 1 July 2018. Burra Foods expects strong interest in the program with applications closing on 15 June 2018.
Analysts are currently predicting a FMP as low as $5.50 and as high as $6.20 for the FY19 season making this offer an important one for Burra Milk Supply Partners said Crothers.
“Furthermore headline prices quoted by the media are often unachievable on a typical Gippsland supply curve,” he said. “The option to lock in a portion of milk solids at $6/kg is not only at the high end of these headline price ranges, but is also a guarantee without vagaries – it is the price.”
“This program however is not just about next year, it is fixing a price across the next three years,” said Crothers. “I can’t predict the future price but I do know volatility will continue and we are offering our Milk Supply Partners the opportunity to reduce income volatility.”
Opening prices continue to be under review with an announcement expected shortly.