Bega joins farmgate squeeze on Murray Goulburn

BEGA Cheese has joined NZ dairy giant Fonterra in lifting its sector outlook, announcing an opening farmgate milk price that heaps pressure on rival Murray Goulburn.

Bega’s price of $ 5.50 per kg for its Victorian milk supply is 10 per cent higher than last season’s opening price and reflects improvements in the global dairy market, the producer said yesterday.

The offer contrasts to the $ 4.70 per solids price tabled by Murray Goulburn this week, a move that contributed to a sell off of the Victorian dairy cooperative’s stock.

While Murray Goulburn expects prices to improve and the market to steady, its offer is also below that from Fonterra, the key Kiwi competition.

On May 24, Fonterra raised its forecast farmgate payout for the next two seasons.

Fonterra chairman John Wilson said it underlined the stronger fundamentals bolstering global dairy markets.

The Kiwi dairy giant now expects a payout for the current 2016- 17 season to reach $ NZ6.15 ($ 5.87) per kilogram of milk solids, up from its previous forecast of $ NZ6.00.

As a result of higher prices for whole milk powder, Fonterra also raised its initial forecast for the 2017- 18 season to $ NZ6.50.

With revenue for the first nine months up 8 per cent on the same period last year, to $ NZ13.9 billion, Fonterra has been able to retain its forecast dividend of NZ40c per share.

By contrast, shares in Murray Goulburn, which suffered a $ 31.9 million loss in its first half, dropped 14.5 per cent on Tuesday, before freefalling a further 13 per cent on Wednesday to an all- time low of 62c by lunchtime.

Bega executive chairman Barry Irvin said the NSW company now wanted to increase supplier confidence and deliver a positive price signal to farmers after a “tumultuous period” for the local industry.