MG deal could push up Fon­terra prices

Tasmanian Country - - NEWS -

FON­TERRA milk sup­pli­ers are fac­ing a boost to their in­comes off the back of Sa­puto’s pro­posed buy­out of Mur­ray Goul­burn.

With Fon­terra’s price tied to MG’s through the Bon­lac Sup­ply Com­pany Agree­ment, its sup­pli­ers could be el­i­gi­ble to re­ceive the price be­ing of­fered to Mur­ray Goul­burn sup­pli­ers as part of the purchase deal.

A com­bined MG and War­rnam­bool Cheese and But­ter un­der the own­er­ship of Cana­dian could process more than 3.5 bil­lion litres of milk this year – about 40 per cent of the na­tion’s milk pro­duc­tion.

Sa­puto is of­fer­ing MG sup­pli­ers a loy­alty pay­ment of 40c per kilo­gram of milk solids on Au­gust 15 next year if the deal goes through.

The pro­posed move would push up the av­er­age weighted price to $6/kgMS and it would also place the MG price ahead of Fon­terra’s fore­cast clos­ing price of $5.80/kgMS.

This ex­cludes Fon­terra’s “ad­di­tional” 40c/kg/MS on top of its base price.

Bon­lac Sup­ply Com­pany chair­man Tony Mar­wood said he had re­ceived calls from farm­ers ask­ing what was now the bench­mark price.

Given that Sa­puto’s bid to buy MG was await­ing ap­proval from the Fed­eral Gov­ern­ment and the co-op­er­a­tive’s sup­pli­ers, Mr Mar­wood was tightlipped about what it could mean for the far­m­gate price.

“It is too early to ac­tu­ally say what the bench­mark is at this point in time,” Mr Mar­wood said.

“They still have got to de­liver. It is fine to have it in writ­ing, but they still have got to de­liver.”

Asked if the loy­alty pay­ment was part of the far­m­gate milk price, Mr Mar­wood said “we will have to see how it is struc­tured”.

Fon­terra flagged a re­view of the Bon­lac Sup­ply Com­pany agree­ment four months ago. Re­cently it pro­posed cre­at­ing a co-op­er­a­tive milk pro­ces­sor in Australia.

Nei­ther pro­posal has been de­vel­oped as of yet, so the ex­ist­ing BSC agree­ment – due to ex­pire next year – re­mains in place.

With other dairy pro­ces­sors also bench­marked to MG’s far­m­gate price, many farm­ers are ask­ing what the Sa­puto deal will mean for them.

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