Fon­terra an­nounces early step-up

Dairy News Australia - - FRONT PAGE -

FON­TERRA HAS an­nounced the first step-up for the sea­son, lift­ing its open­ing price by 20¢/ kg milk solids (MS) to $5.50 kg/MS. The fore­cast clos­ing range has been lifted to be­tween $5.50–$5.80 kg/MS. The in­crease will ap­ply from 1 July 2017 and will be paid on 15 Au­gust 2017. Fon­terra’s ad­di­tional pay­ment of 40 cents per kg/MS is payable on top of the re­vised far­m­gate milk price, and brings the to­tal av­er­age cash paid to $5.90 kg/MS. Fon­terra Aus­tralia Man­ag­ing Di­rec­tor René De­doncker said that im­proved mar­ket con­di­tions and the strength of the Aus­tralian busi­ness sup­ported this step up. “Since the start of this sea­son our milk pool has grown, and our as­sets are near­ing op­ti­mal ca­pac­ity,” Mr De­doncker said. “Cou­pled with strong de­mand from Fon­terra’s Aus­tralian and global cus­tomers, this has en­abled us to de­liver this step up to our farm­ers.” Mr De­doncker said the rally in the Aus­tralian dol­lar was likely to in­flu­ence the end of sea­son milk price within that fore­cast range. “We con­tinue to mon­i­tor cur­rency move­ments closely and will keep our farm­ers up­dated through­out the sea­son with the lat­est mar­ket con­di­tions,” he said. In an up­date to its sup­pli­ers, Mur­ray Goul­burn said the po­ten­tial rise of the Aus­tralian dol­lar against the US green­back could also in­flu­ence its end of year price. “While main­tain­ing the fore­cast FY18 FMP range of $5.20–$5.50/kg MS, if the re­cent strength­en­ing of the Aus­tralian dol­lar was to con­tinue over the full fi­nan­cial year, this could cre­ate some un­cer­tainty in re­la­tion to the achiev­abil­ity of $5.50/kg MS,” the co­op­er­a­tive said. “We will con­tinue to con­sider all av­enues to max­imise the avail­able FMP.” Katunga Fon­terra sup­plier Peter McIn­tosh ques­tioned the pro­ces­sor’s mo­tives af­ter it an­nounced its lat­est step-up. Mr McIn­tosh said this lat­est an­nounce­ment was great, but ques­tioned whether it was mar­ket driven. “It’s got to be com­pet­i­tive ad­van­tage they’re look­ing for,” he said. “No questions Fon­terra would pre­fer to be the lead­ing pro­ces­sor in Aus­tralia. “We are sup­posed to be naive enough to ac­cept that this is sim­ply a mar­ket-driven vari­a­tion in price?” Mr McIn­tosh ques­tioned whether it was in the in­dus­try’s best long-term in­ter­ests to see Fon­terra take ad­van­tage of the sit­u­a­tion with Mur­ray Goul­burn and press for com­mer­cial dom­i­nance. How­ever, he said he was happy to ac­cept Fon­terra’s price of­fer, ar­gu­ing if it ben­e­fited sup­pli­ers in the short term, it was not a bad thing. United Dairy­farm­ers of Vic­to­ria pres­i­dent Adam Jenk­ins wel­comed the price step up as pos­i­tive in “re­turn­ing cash back into farm­ers’ pock­ets”. “And that also sends a sig­nal that the global mar­ket is be­com­ing more sta­ble and in bal­ance, which is good news for farm­ers,” Mr Jenk­ins said. But Mr Jenk­ins said the step-up re­mained mar­ket driven, and stressed the im­por­tance in the far­m­gate milk price need­ing to re­flect mar­ket prices. “We don’t want to get too much di­ver­gence from that,” he said. Mr Jenk­ins re­mained con­fi­dent the lat­est devel­op­ment did con­sti­tute a fair re­flec­tion of the mar­ket. He de­scribed such wel­come and timely price im­prove­ments as in­cre­men­tal steps in re­build­ing trust with sup­pli­ers. “I still think there’s a long way to go, it’s a small step for­ward,” he said. “It will be over a num­ber of sea­sons we see trust and con­fi­dence come back into the sup­plier base. “Signs are look­ing much firmer than 18 months ago.”

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