MG deal could push up Fonterra prices
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.