Beston Foods cashflow crisis eases: pays up on milk cheques

Dairy processor Beston Foods withheld 15 per cent of farmers’ milk cheques earlier this month, but plans to make good by next week.

Beston Global foods has struggled to maintain cashflow, delaying farm payments.

South Australian dairy group, Beston Foods, is set to pay a 15 per cent shortfall in its dairy farmers’ milk cheque payments by early next week, after resolving its cashflow problems.

Beston Global Food Company chief executive Fabrizio Jorge said a flood of cheap dairy imports and an unexpected surge in milk production had left the company with “north of $20 million in stock” in February, which the company was now selling down to bring more cash back into the company.

The cashflow crisis forced Beston to withhold 15 per cent of farmers’ April 15 milk cheques, which Mr Jorge said the company planned to finally deliver by next Monday or Tuesday.

Like many local dairy processors Mr Jorge said Beston had struggled to compete on the domestic market with a flood of cheap US and New Zealand cheese and butter imports.

“We had to relocate sales from the domestic market to the export chain, which has a longer cash cycle,” Mr Jorge said.

He said the company had also locked in contracts last year with farmers on the assumption that the Bureau of Meteorology’s forecast of a drought-driven El Nino in 2023-24 would mean less milk coming through the factory door.

But almost perfect spring and summer conditions across the southern Australia allowed farmers to deliver 117 million litres of milk to Beston by the end of February, up 12 per cent or about 13 million litres on the same seven months of the previous season.

In a letter to suppliers earlier this month Mr Jorge said “with our ongoing commitment to collect and process all milk that is supplied to us across our supplier network, such incremental volume of milk supplied year to date and converted to Cheese products has added an unprecedented pressure on our short-term working capital”.

Signs that Beston was in trouble emerged in February, when it released results showing it had recorded negative operating cashflow of $14.4m in the first six months of 2023-24 and inventory levels of $28.5m.

Asked what he thought would happen with the opening 2024-25 milk price, Mr Jorge said “clearly it has to come down, (which) I think farmers understand”.

He said processors were in the midst of contract negotiations with Japan that would be crucial to determining what happens over the coming season.