Burra trumps MG in opening price war
A conservative opening milk price announced by Murray Goulburn last week was trumped days later when Burra Foods delivered a price at least 75 cents a kilogram milk solids higher.
Twelve months after a bitter price blow that few thought they could recover from, Murray Goulburn announced a conservative opening price of $4.70/kg milk solids on Tuesday.
Three days later, all attention was on Burra Foods when it announced an opening farm gate milk price range of $5.45/kg to $5.65/kg milk solids.
Burra Foods chief executive officer Grant Crothers said this was a 23 per cent increase on the previous year.
The Burra price also includes an initiative to attract new suppliers with a 40 cents per kilogram milk solids cash injection.
Mr Crothers said Burra Foods continued to invest heavily in capacity at its Korumburra processing site and wants to see growth in existing and new suppliers.
“I am very optimistic about our ability to respond to increasing demands and maintain our ability to pay a price premium to our milk supply partners.
“We are confident that depressed dairy prices are behind us and it is satisfying to be able to provide a strong opening price,” Mr Crothers said. “
Last year, amid the dairy price crisis, farmers began the season with a below break even price of $4.31/kg/ms.
The United Dairyfarmers of Victoria welcomed the early opening announcements, saying suppliers appreciated the milk processor’s honesty and transparency, but said it was important to deliver returns as soon as they reached the market.
Fonterra is yet to announce it’s 2017-18 opening price but both MG and Fonterra have forecast their closing prices for the current season.
Fonterra indicated it would close the season between $5.30 and $5.70 per kilogram milk solids, while MG last week forecast its closing price would be somewhat lower, in the range of $5.20 $5.40/kg milk solids.
MG chief executive officer Ari Mervis told suppliers that while the opening and forecast closing prices were an improvement on last year, MG’s performance remained below his expectations.
Mr Mervis said MG had announced a comprehensive strategic review to look at all aspects of the corporate structure including the profit sharing mechanism and capital structure.
“I see this review as a fundamental next step to strengthen MG for the future. “While the previous decisions resulting from the manufacturing footprint review, including the announcement of three site closures were necessary, I do not consider them alone to be sufficient to move the business forward,” he said.
UDV president Adam Jenkins said while MG’s opening price was conservative, suppliers welcomed the processor’s honesty and transparency.
“We recognise that MG is in a challenging situation trying to navigate its way from the past into the future, but a $4.70/kg opening price presents a serious challenge for dairy farmers who are still recovering from the events of last year. The importance now is for MG to deliver returns to farmers as soon as the returns are realised in the marketplace,” he said.
UDV members last month called on milk processors to release their opening prices by June 10 each year, ahead of the season.