Fonterra steps up farmgate price to Australian farmers after being outbid by Saputo, Bega
In a remarkable move to retain suppliers, Fonterra has increased its average farmgate price — less than two days after revealing its initial offering to the farmers.
FONTERRA have stepped up their average farmgate price to open the 2020-21 season, less than 48 hours after a low-ball opening figure was lobbed at the industry.
In an extraordinary move, Fonterra Australia managing director Rene Dedoncker admitted the processor needed to lift their price to be competitive — from $6.06 per kilo milk solids on Monday to $6.40 this morning.
The $6.40 per kilo milk solids average brings the Auckland-based processor into line with chief rivals Saputo and Bega, which both offered the same figure on Monday.
Fonterra has also given a forecast closing range to $6.40 to $6.70 per kilo milk solids for the 2020/21 season.
Mr Dedoncker said Fonterra had kept in line with industry convention to open at a price lower than the full-year forecast, with the understanding that step-ups would be paid throughout the season where the market supports it.
“Clearly though, our opening price needs to be competitive,” the Fonterra chief said.
“We said we would review our pricing in June, and we have brought this forward due to the competitive environment we are in, which is what is driving this price.
“Our revised opening price fits at the lower end of our original full-year forecast and is aligned with our business plans for the year ahead.”
The Weekly Times understands a number of Fonterra suppliers contacted the processor to express their frustration with the $6.06 per kilo milk solids figure, suggesting they would move to a competitor if the figure wasn’t stepped up.
“On Monday we said that the impact of COVID-19 on economies and the market is still largely unknown and will be uncertain for some time,” Mr Dedoncker said.
“Consumers’ purchasing power is reduced and the food service industry remains impacted. This holds true today,” he said.
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