Opening milk prices: ADFC, Bulla, Fonterra, Saputo, Lactalis
Australia’s tight milk market is defying international gravity with unprecedented first fortnight step-ups offered by processors. See all the prices here.
Australia’s tight milk market is defying international gravity with unprecedented first fortnight step-ups offered by processors.
The nation’s big three processors — Fonterra, Saputo and Bega — are all offering at or near a $9.40/kg milk solids average — about $2/kg higher than initially forecast only four months ago.
United Dairyfarmers of Victoria vice president Mark Billing said a first fortnight step up was an indication of just how tight supply was across south-eastern Australia.
“It’s an excellent development for industry confidence – particularly when you look at input costs,” he said.
“Yes, usually you see step ups happening many months later. So this is something out of the ordinary but reflective of the fact that milk supply is going to remain tight for some time.”
Saputo confirmed the $9.40/kg opening weighted average for Victorian suppliers just two days before the start of the new financial year, the deadline mandated by the federal government’s dairy code of conduct.
Fonterra declared last week it would match the $9.40/kg average but Bega management is yet to confirm it has also reached the $9.40/kg benchmark.
Fonterra Australia managing director René Dedoncker said robust opening prices helped primary producers plan into next year.
“Since closing out last season and heading into the new year, we’ve seen a 24 per cent uplift in the average farmgate milk price,” he said.
“These record prices are good news for farmers as they tackle higher input costs including feed, power and fertiliser.
“With national milk production forecast to decline by 250 million litres in 2021-22, we hope that the good milk price, coupled with our on-farm support, give farmers confidence to increase production and invest for the future.”
The Weekly Times understands Bega has pushed past its previously declared $9.10/kg offering just prior to the July 1 deadline but the processor has not outlined the change publicly, in contrast to previous announcements.
Smaller players have pushed averages higher — notably Bulla’s top supplier bracket receiving an unprecedented $10/kg milk solids in pre-deadline confirmation.
eastAUSmilk co-chief executive Eric Danzi cautioned farmers to read the fine print on milk contracts.
“(Farmgate) averages mean very little,” he said.
“Every farmer coming off contract need to get income estimates with the same realistic assumptions off all processors to see who is paying the most for their farm.”
Sky-high domestic prices are becoming increasingly detached from international dairy trade conditions, which have softened in recent months.
A sharp drop in the Global Dairy Trade headline figure was notched up last week, underscoring how dairy demand has weakened abroad.
The international commodity index fell 4.1 per cent to sit at US$4360 (A$6427).
Butter led the fall in dairy trade, with a 9 per cent drop, while skim milk powder trade also softened.
New Zealand-based dairy analyst Amy Castleton said there had been seven falls in the GDT over the past eight trading cycles.
She said it was worth noting July was usually a weak month for dairy trade due to summer holidays in the northern hemisphere.
JULY 6: FONTERRA’S FIRST-WEEK LIFT
Fonterra has raised its average farmgate milk price to $9.40/kg milk solids, equaling the figure put out by rival processor Saputo.
Meanwhile, a sharp drop in the Global Dairy Trade headline figure has been recorded overnight.
The international commodity index fell 4.1 per cent to sit at $US4360 ($A6427).
Butter led the fall in dairy trade, with a 9 per cent drop, while skim milk powder trade also softened.
New Zealand-based dairy analyst Amy Castleton said there had been seven falls in the GDT over the past eight trading cycles.
She said it was worth noting July was usually a weak month for dairy trade due to summer holidays in the northern hemisphere.
JULY 5: IS BULLA A MARKET LEADER?
Southern Australia’s $10 a kilogram of milk solids ceiling has been smashed with top suppliers at a rising processor set to receive the milestone milk figure.
Bulla confirmed this week it had lifted its farmgate price window just prior to the July 1 deadline to $9.40-$10.00, a substantial lift on its March indicative range.
The processor was the first out of the 2022-23 starting gate in March with an opening range of $7.40 to $8.00 – kicking off a series of offers and counter-offers.
JUNE 30: FINAL DAY FRENZY
Burra Foods and Goulburn Valley Creamery are the latest processors to lift prices, with the start of the new dairy season tomorrow.
Burra Foods chief executive Stewart Carson confirmed the processor’s opening farmgate price range had been lifted to $9.10-$9.50/kg milk solids
“The competition for farmgate milk supply continues to accelerate. It is definitely a sellers’ market and we have been monitoring announcements on a daily basis,” Mr Carson said.
“Milk supply partnerships are the foundation of our business, and we need to maintain a competitive price.
“As per normal, we will continue to report our milk price range rather than a headline price because over 90 per cent of our (suppliers) will r`eceive an income estimate within this range.”
Meanwhile, Goulburn Valley Creamery has further increased its average milk price to $9.75/kg of milk solids.
Management said the figure applied for 2022-23 for exclusive and non-exclusive supply.
JUNE 29: UNION DAIRY LIFTS TWICE IN A WEEK
Union Dairy Company has increased its average milk price to $9.65/kg milk solids — the second lift in a week.
Over the weekend, UDC raised its average price to $9.50/kg but the latest lift positions it as one of the price leaders, two days out from the start of the season.
“Being a smaller company we are nimble and are able to react quickly to the changes in the market,” UDC milk supply general manager Monique Jeffries said.
“We have a new pricing model with three pricing options. It is simple and has been welcomed by our suppliers. It is attractive for a wider range of farmers and lets them farm to the farm and optimise margins rather than chase a milk price that may reduce their profitability.”
JUNE 29: SAPUTO BREAKS AHEAD OF ARCH RIVALS
With two days to go until the start of the new dairy season, Saputo has sprinted in front of arch-rivals Bega and Fonterra with its opening price.
Saputo management confirmed its opening weighted average farmgate milk price for non-exclusive supply has increased to $9.40/kg milk solids.
“This is an increase of 21 cents per kilogram of butterfat and 42 cents per kilogram of protein,” the management statement read.
“Our exclusive minimum price has been increased by the same rates.”
JUNE 27: UNION DAIRY FIRMS $9.50/KG BENCHMARK
Union Dairy Company has raised its average weighted price to $9.50/kg milk solids, reflecting a price standard among smaller processors.
UDC chief operating officer Andrew Wellington said the $9.50/kg figure reflected the hot competition for milk across south-eastern Australia.
“You’ve got to be competitive with your price. The $9.50 figure reflects where the market is at – demand is strong,” Mr Wellington said.
“Input costs are high, so opening prices have to be strong. Hopefully, in the second half (of 2022-23 season), fertiliser prices stablise, urea and grain prices stablise and we see those profit margins grow.”
Mr Wellington said with UDC operating eight dairy farms of its own, the company understood the price pressures faced by existing and potential suppliers.
“Competition has been great for dairy farmers. The high opening prices are really giving the industry a confidence boost,” he said.
JUNE 24: BULLA BACK IN FRONT
Bulla has reaffirmed its position as one of the top-paying processors with a new lift in its farmgate price.
Suppliers in the top price band will receive an average weighted price of $9.80/kg of milk solids, one of the highest figures in the Victorian market currently.
“Bulla Dairy Foods is pleased to announce an updated milk price ahead of the 2022-23 season that will see the majority of Bulla suppliers receive in the $9.50 – $9.80/kg MS bands,” Bulla dairy general manager Rohan Davies said.
“We, at Bulla, remain excited for the F23 season ahead and look forward to continuing our many long-standing farmer relationships as well as welcoming new farmers into the Bulla family.”
In April, Bulla was one of the first processors to promulgate an opening price — which at the time sat at $7.40/kg – $8.00/kg of milk solids. Several revised figures have been issued as demand grows stronger ahead of the July 1 season start date.
JUNE 23: ADFC EDGES CLOSER TO $10
Australian Dairy Farmers Corporation are now one of the leading processors on farmgate pricing with an average above $9.50/kg of milk solids.
In a letter to suppliers, ADFC management confirmed an average seasonal figure of $9.55/kg of milk solids for the upcoming season, which starts next week.
The seasonal calendar pricing breakdown for ADFC now stands at $9.15/kg between July and December this year and $9.95/kg between January and June 2022.
Management confirmed in the letter that revised income statements would be emailed to existing suppliers by the end of this week.
JUNE 22: FONTERRA STEPS UP
Fonterra has joined Bega and Saputo in pushing their average farmgate price above $9.00/kg
milk solids, as the clock ticks down to the new dairy season.
Management at Fonterra confirmed to suppliers today that its average weighted price for the 2022-23 season now sits at $9.10/kg milk solids.
It comes less than a week after both Bega and Saputo broke through the $9/kg barrier, with some smaller suppliers higher still.
Meanwhile, Coles are also set to review their minimum milk prices after a letter was distributed to suppliers.
Coles dairy general manager Brad Gorman wrote to farmers recently to indicate the price review was set to be announced this week.
The price revision applies to farmers in Victoria, Tasmania and South Australia.
“We recognise that many farmers have already signed a new milk price agreement with Coles,” Mr Gorman said.
“As such, we advise that if you have signed the new MPA prior to our update last week, you will be eligible to receive the new minimum milk price once announced.”
JUNE 21: SAPUTO JOINS NINE-BUCK CLUB
Saputo has become the latest processor to break through the $9/kg milk solids barrier after Bega’s announcement last week.
In a statement this morning, Saputo confirmed its opening weighted average farmgate milk price for non-exclusive supply had increased to $9.10/kg milk solids.
Management said the headline figure represented an increase of 21 cents per kg of butterfat and 42 cents per kg of protein.
Saputo’s exclusive minimum price had been increased by the same rates.
“The non-exclusive minimum price is the price we will pay monthly to suppliers for non-exclusive supply of premium quality milk in each of the Northern Region, South-West Victoria and South Australia region, Gippsland region and Tasmania including King Island,” the processor said.
“Exclusive milk supply agreements are available to suppliers in our Northern Region and South-West Victoria and South Australia region.”
JUNE 16: BEGA GOES TO $9
A bidding war for milk supply has intensified with Bega becoming the first of Australia’s big three processors to break through the $9 a kilogram of milk solids barrier.
In a letter to suppliers today, Bega executive chairman Barry Irvin confirmed a 30c/kg increase in the processor’s opening average milk price to $9.10/kg of milk solids.
Bega will also raise its Northern Victoria and Riverina opening price by 35c to $9.25/kg milk solids
Both Fonterra and Saputo have confirmed an average weighted price of $8.80/kg of milk solids, although some smaller players are higher than all three big players.
Bega’s $9.10/kg figure applies to southern Victorian and southeast South Australian exclusive suppliers.
“Since revising our opening prices on 1 June 2022, we have been carefully reviewing the market for our products and the continued strong competition for milk supply,” Mr Irvin said.
“Whilst market fundamentals remain stable for our product returns, the competitive market for milk supply is very strong with many companies adjusting their milk prices over recent weeks, impacting our competitive position.
“As always, we will endeavour to improve milk pricing should market circumstances allow and will continue to review milk pricing to ensure we are making a competitive offer to our suppliers for their milk.”
Smaller players have also hiked their prices since the June 1 deadline.
Australian Dairy Farmers Corporation lifted its average price to $9.30/kg of milk solids on Friday, one of the highest offerings in the southeast Australian market.
Lactalis last week offered farmers $9.20-$9.30/kg of milk solids, as it tried to leverage into Sydney and Brisbane fresh markets
WHAT FARMERS ARE SAYING:
In a scramble to nail down milk supply, Australia’s dairy processors have been locked in a bidding war in recent weeks worthy of Sotheby’s or Christie’s auction houses.
Only a few short years ago, an average weighted opening price of $8.00 a kilogram of milk solids was considered the price ceiling.
No longer.
The $9.00/kg milk solids barrier has been well and truly broken in recent weeks with processors big and small locked in a bidding frenzy more common in Sydney or Melbourne’s tight real estate market than in the milking sheds of regional Australia
Southwest Victorian farmer Greg Tongs operates a dairy at Bullaharre, just outside Cobden.
He said the turnaround in the industry’s fortunes since the 2016 price clawback had been remarkable.
“It’s been extremely positive, a real boost for dairy farmers,” Mr Tongs said.
“Some of the processors have got average prices out there above $9/kg milk solids, which has got to be a good thing for confidence in the industry.”
The owner-operator of a 240-head dairy, Mr Tongs supplies SW Dairy Limited and is also a director of the company, which is based in the Western District.
“There’s more choice out there for farmers in terms of processors and SW Dairy has been a good fit, being a more seasonal farmer,” he said.
“Fertiliser has gone up in price, that’s for sure, but grain prices don’t impact us. It all depends on where you farm, what the season is like. But inputs haven’t been as big a problem here.”
Apart from input costs, a tightening on the supply side has led many processors to evaluate and re-evaluate prices in the fortnight following the June 1 dairy code of conduct deadline.
Bulla is one of the leading processors on price with a top offering of $9.50/kg of milk solids confirmed over the weekend.
The processor’s dairy and procurement manager Rohan Davies said the majority of Bulla suppliers would receive a farmgate return in the $9.30-$9.50/kg milk bands.
“Bulla is now confirming its supplier contracts as we get closer to the start of the new season, and we’re pleased to announce this increase today as part of that process,” he said.
Saputo also raised its opening weighted farmgate average from $8.50/kg of milk solids to $8.80/kg of milk solids.
Management in a statement released over the weekend said: “This is an increase of 21 cents per kilogram of butterfat and 42 cents per kilogram of protein. Our exclusive minimum milk price has been increased by the same rates.”
Fonterra last week lifted its average farmgate offering by more than 50 cents a kilogram of milk solids to a weighted average price of $8.80/kg milk solids.
The lift of $0.55/kgMS comprises $0.47/kg of butterfat and $0.65/kg of protein.
“Since announcing our opening price on 11 May 2022, we have secured our pricing for key contracts which play a role in supporting our milk price and currency markets have remained stable,” Fonterra Australia managing director Rene Dedoncker said.
Lactalis last week offered farmers $9.20-$9.30/kg of milk solids, as it tried to leverage into Sydney and Brisbane fresh markets.
Lactalis, which owns brands including Pauls and Oak, is among a number of companies that are already putting pressure on New Zealand giant Fonterra, which has fallen well behind the pack on pricing.
Smaller players have also hiked their prices since the June 1 deadline. Australian Dairy Farmers Corporation lifted its average price to $9.30/kg milk solids on Friday, one of the highest offerings in the southeast Australian market.
Bega lifted its price to $8.90/kgMS for Northern Victorian and Riverina farmers and $8.80/kgMS for those in the state’s south.
EastAUSmilk co-chief executive Eric Danzi encouraged farmers to read the fine print before signing up to a processor.
“Get quotes from all processors. Make it clear you need more to stay in the industry,” Mr Danzi said.
JUNE 13: SAPUTO AND BULLA LIFT PRICES
Saputo and Bulla have lifted their farmgate figures with weeks to go until the new dairy season as price records are smashed.
Bulla is one of the leading processors on price with a top offering of $9.50/kg of milk solids confirmed over the weekend.
The processor’s dairy and procurement manager Rohan Davies said the majority of Bulla suppliers would receive a farmgate return in the $9.30-$9.50/kg of milk bands.
“Bulla is now confirming its supplier contracts as we get closer to the start of the new
season, and we’re pleased to announce this increase today as part of that process,” he said.
Saputo also raised its opening weighted farmgate average from $8.50/kg of milk solids to $8.80/kg of milk solids.
Management in a statement released over the weekend said “this is an increase of 21 cents per kilogram of butterfat and 42 cents per kilogram of protein. Our exclusive minimum milk price has been increased by the same rates”.
JUNE 10: FONTERRA GOES HIGHER
Fonterra has bumped up its average weighted offering by 55c/kg of milk solids while Australian Dairy Farmers Corporation upped the ante on Friday afternoon.
ADFC have lifted their average price to $9.30/kg milk solids, one of the highest offerings in the southeast Australian market.
In a letter to suppliers on Friday, Fonterra Australia chief executive Rene Dedoncker confirmed a weighted average farmgate milk price of $8.80/kg of milk solids
The lift of $0.55/kg of milk solids comprises $0.47/kg of butterfat and $0.65/kg of protein.
“This price rise is part of our commitment to passing on market returns to our farmers,” Mr Dedoncker said.
“Since announcing our opening price on 11 May 2022, we have secured our pricing for key contracts which play a role in supporting our milk price and currency markets have remained stable.”
Mr Dedoncker said the release of Fonterra’s third quarter results on May 26 showed the co-operative continued to perform.
“Our Australian Ingredients business achieved a solid result due to steady global demand for dairy but limited supply, and further enhanced by continued efficiencies across our manufacturing operations,” he said.
“While the outlook for dairy remains positive, we’ve talked at supplier meetings over the last few weeks of ongoing market uncertainty.
“This includes Covid-related shipping delays, the Russia-Ukraine conflict, and inflation – which is driving up the cost of everything from fuel and electricity, to fertiliser, freight and
packaging, putting pressure on our input costs, and yours.”
JUNE 8: LACTALIS INCREASES ITS OFFER
On Wednesday, Lactalis raised the bar in the battle for milk, offering farmers $9.20-$9.30/kg of milk solids for the 2022-23 season, as it tries to leverage into Sydney and Brisbane fresh markets.
Lactalis — which owns brands including Pauls and Oak — is among a number of companies that are already putting pressure on New Zealand giant Fonterra, which has fallen well behind the pack on pricing.
At this stage Lactalis’ Gippsland and southwest Victorian exclusive seasonal milk supply agreement offers farmers, from:
JULY and December to June $6.79/kg for butterfat and $10.19/kg for protein
AUGUST to November months the offer is $5.92/kg and $8.89/kg.
In Victoria, Tasmania, NSW (Southern Riverina) Lactalis is offering exclusive milk supply agreements for flat supply, from:
JULY and August $6.07/kg fat and $9.11/kg protein.
SEPTEMBER to November $5.31/kg fat and $7.97/kg protein.
DECEMBER $6.07/kg fat and $9.11/kg protein
JANUARY to June $7.48/kg fat and $11.23/kg protein
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