Farm­ers miss $7 fixed milk price

Matamata Chronicle - - Rural Delivery - By GER­ARD HUTCHING

Some dairy farm­ers will be kick­ing them­selves for not sign­ing up to Fon­terra’s guar­an­teed milk price scheme, which is pay­ing out $7 a kilo­gram of milk solids this sea­son.

Un­der the scheme, only a por­tion of a farmer’s to­tal milk sup­ply qual­i­fies for the price, which is sig­nif­i­cantly higher than the Fon­terra fore­cast price of $5.30kg/ms that most farm­ers will re­ceive in 2014-15.

Fol­low­ing a suc­cess­ful pi­lot in the 2013-14 sea­son, a guar­an­teed milk price was of­fered in June this year for 40 mil­lion kg/ms. Of this, about 26m kg/ms was taken up. This vol­ume equates to about 45,000m tonnes of whole milk pow­der, or 2 per cent of Fon­terra’s milk sup­ply.

Rabobank economist Hay­ley Moyni­han said farm­ers could bid for a vol­ume of milk at a price which would be guar­an­teed, as op­posed to re­ceiv­ing a far­m­gate price which fluc­tu­ates and is only a fore­cast un­til the end of the sea­son.

‘‘Not many farm­ers chose to take up the op­tion. When the $7 price was of­fered, that was the fore­cast milk price at the time, which ended up at $8.40. There will be few who will be kick­ing them­selves, be­cause it would un­doubt­edly have been a good op­tion for part of the milk they sup­plied,’’ Moyni­han said.

Fon­terra said the scheme of­fered farm­ers cer­tainty over a por­tion of their in­come, and more con­fi­dence about tak­ing on debt or car­ry­ing out cap­i­tal works. The scheme also al­lowed Fon­terra to of­fer its cus­tomers sta­ble pric­ing, and lock in longer- term sup­ply con­tracts with key cus­tomers at set prices, while at­tract­ing a pre­mium.

Fon­terra spokesman Aaron Atkin­son said farm­ers could of­fer up to 75 per cent of their sup­ply, or a min­i­mum of 10 per cent.

‘‘Given that this year we were un­der­sub­scribed, if farm­ers had ap­plied for 75 per cent they would have got 75 per cent. We had a full range of ap­pli­ca­tions, from ones who wanted to lock in a small amount to higher,’’ Atkin­son said.

Within one month of the June price be­ing con­firmed, Fon­terra had sold more than 40,000m tonnes of whole milk pow­der to cus­tomers at long term fixed prices and used the fu­tures mar­kets for the re­main­ing quan­tity.

‘‘We have cus­tomers who run large and com­plex multi- bil­lion dol­lar busi­nesses and they come to us and ask if we can give them a fixed price six or 12 months into the fu­ture.

‘‘ We say we can and charge them a pre­mium be­cause we are giv­ing them cer­tainty,’’ Atkin­son said.

Fon­terra is of­fer­ing farm­ers another chance to take up the scheme in De­cem­ber, fol­low­ing a board meet­ing when the fore­cast far­m­gate milk price will be up­dated.

It’s the first time there’s been a mid-sea­son of­fer­ing. This time 20m kg/ms will be avail­able, with a price based off the up­dated fore­cast price. Ap­pli­ca­tions will close on De­cem­ber 19.

Atkin­son said the con­tin­u­a­tion of the scheme de­pended on farm­ers ‘‘vot­ing with their feet’’. If they found it a use­ful tool and more and more opted in, then Fon­terra would con­tinue to of­fer it.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.