Fonterra, Saputo and Bega urged to raise farmgate prices after 30-week hiatus
This week marks 30 weeks without a price step-up from the big three milk processors, with dairy farmers calling on Fonterra, Saputo and Bega to pay over more of their profits to them.
SKYROCKETING international prices and impressive domestic sales are placing renewed pressure on dairy processors for a long-delayed farmgate price step up.
Today marks 30 weeks without a step-up from the big three processors — the longest price impasse in more than two decades, apart from the post-2016 clawback.
Yet the Global Dairy Trade auction result has jumped 4.8 per cent in the past fortnight – equating to an average price of $US3593 ($4659) per metric tonne.
The crucial indicator has risen 16 per cent since mid-November, when farmers began calling for an income rise.
The skim milk powder price has jumped 7 per cent in the past fortnight, while butter posted a solid 4.6 per cent increase.
United Dairyfarmers of Victoria president Paul Mumford has demanded dairy’s big players — Fonterra, Saputo and Bega — to follow Bulla’s pre-Christmas step up.
“My message to the big processors is simple: Time to cough up, fellas,” Mr Mumford said.
“We were provided with opening prices on June 1 as part of the mandatory dairy code of conduct, for the July 1 start of the season. So their price assessment of the industry is now at least six months to seven months out of date.
“We need a figure that reflects where the industry stands as of late January heading into February. It would be a welcome act of goodwill on behalf of the processors after their conduct during and in the aftermath of the 2016 clawback.”
Fonterra was forced to lift its average opening price in June — from $6.06/kg milk solids on Monday to $6.40/kg milk solids — within 48 hours of its initial figure being reported as part of the mandatory dairy code of conduct.
Saputo offered $6.40/kg milk solids at the June 1 deadline while Bega split its opening figure geographically — $6.40 for southern Victoria and $6.55 for northern Victoria.
Management at Fonterra, Saputo and Bega were contacted by The Weekly Times but all three declined to comment.
Insiders at two of the big three processors have told The Weekly Times that management is concerned about commenting directly on the issue because they are aware any explanation for a lack of farmgate action will prompt further supplier anger.
Mr Mumford said the processors had used the strong Australian dollar as an excuse to dodge a step up.
This week, the Australian dollar was trading around US77c, about 10c higher than January 2020.
“The Australian dollar has been a lot stronger in past seasons — trading at and above parity with the American greenback — and there have been step ups in those seasons,” Mr Mumford said. “The Australian dollar is only one factor — you can’t just hide behind it.”
While international prices have leapt since early December, domestic dairy sales have been ringing up Australian supermarket cash registers.
The ‘take home value’ of milk topped $2.65 billion nationwide in November 2020, a 13 per jump year-on-year, according to Dairy Australia’s latest situation and outlook report.
Butter and yellow spreads also increased by 13 per cent over the same 12-month period to register a take-home value of $826 million.
State opposition frontbencher Roma Britnell, a former UDV vice president, said dairy farmers were well aware of strong international prices and expected that trend to be reflected at the farmgate.
She noted strong domestic sales since the start of Australia’s coronavirus restrictions in March 2020.
“You only have to look at the beef sector to see that the laws of supply and demand are being reflected in higher returns for the producer,” the state Coalition MP said.
“Obviously, there’s a different dynamic in dairy with processors in the middle but the same principle applies. When you have consistently strong international prices, as well as sustained demand for dairy here in Australia, then processors need to reflect that and pay producers accordingly.”
On the back of last week’s impressive auction results, Westpac NZ lifted its 2020-21 farmgate milk price forecast from NZ$7.00 (A$6.53) to $7.50/kg milk solids (A$7.00).
Westpac agri-economist Nathan Penny also increased the bank’s forecast for the 2021-22 NZ season by 25, to NZ$7.25/kg milk solids (A$6.77).
“As we have noted over recent months, Chinese demand is underpinning the price surge,” Mr Penny wrote in his market assessment.
“China largely has Covid under control and its economy has rebounded strongly. In fact, the
Chinese economy actually grew over 2020, the only major economy to do so.”
This week marked the 10-year anniversary of the dollar-a-litre generic milk scheme introduced by Coles and replicated by Woolworths and Aldi.
The milestone has renewed calls for government intervention in the sector — particularly in Western Australia, with WA Agriculture Minister Alannah MacTiernan recently meeting with farmers and processors in Perth.
“It’s very clear that the majority of dairy farmers really want some intervention in the marketplace,” Ms McTiernan told ABC radio.
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