Milk deal sours on low price
Parmalat-owned Harvey Fresh received mixed reactions after last week unveiling details of its new contracts to suppliers.
Compared with currentyear contracts, the new terms effective from January 1 offer a higher summer price of 49¢/ litre and lower winter-spring price of 33¢/litre, in a bid to flatten the annual supply curve.
On top of the base price, there are incentives for quality and other factors such as volume.
Harvey Fresh has a policy of not speaking to media, but industry sources say the processor estimated farmers could be down by 1¢/litre on average throughout the year.
Farmers were concerned about an even bigger decrease.
Farmers can opt to sign one, two or three-year contracts with the option to renew.
The price is reviewed on a six-monthly basis and farmers can end contracts within 60 days of the new contract taking effect.
“The new pricing aims to cap and reduce production by offering a far lower price during spring when most milk is produced,” one source said.
“This is particularly frustrating given processors had until recently encouraged farmers to, at their own expense, increase milk production to capture the Asian boom which did not eventuate,” a supplier said.
Another source was concerned a volume incentive remained in place, contradictory to Harvey Fresh’s bid to curb production.
Under this incentive, a smaller farmer producing one million litres annually would receive 3.5¢/litre less than a supplier providing more than 3.5 million litres, encouraging bigger farmers to grow and smaller operators to struggle.
WAFarmers dairy section president Michael Partridge said the new contracts were fair and reasonable.