Milk price battle: Bega closes in on $9/kg in battle with Fonterra and Saputo

Milk processors are scrambling to lock farmers into supply contracts, with Bega lifting its price again. See the contracts.

Peter Hunt and Alex Sinnott

2 min read

June 1, 2022 - 4:29PM

The Weekly Times

Big decision: Dairy farmers across Australia will be pulling apart the milk contracts published by processors today, as competition heats up.

Bega Cheese has raised the stakes in the battle for milk supply, lifting its 2022-23 offering to $8.90/kgMS for Northern Victorian and Riverina farmers and $8.80/kgMS for those in the state’s south.

The price trumps major rivals Fonterra sitting on $8.25/kgMS and Canadian giant Saputo on $8.40.

Expectations are that competition for supply will drive all players to put $9/kgMS or higher on the kitchen table of farms across Australia’s southeast dairy country.

Bega is already offering Tasmanian farmers $9/kgMS and its local Bega Valley and Bodalla farmers $9.50/kgMS.

Processors had until 2pm today to publish their milk supply agreements — delivering record prices for the new season.

Some smaller players are going further than the major operators to secure supply.

Goulburn Valley Creamery (GVC) today increased its opening milk price to up to $9.10/kg of milk solids for 2022-23 for exclusive and non-exclusive supply.

GVC chief executive Mancel Hickey said the higher adjustment reaffirmed the company’s commitment to rewarding premium product from farmer suppliers.

“Our updated milk price is now from $8.50 to $9.10 per kilogram of milk solids,” he explained.

“Again, it recognises the high quality standards of the milk we source. We certainly anticipate many of our farmers will sit toward to the higher end of the pricing band.”

Links to Bega, Fonterra, Saputo, Bulla, Lactalis, Norco, Coles, ADFC, Goulburn Valley Creamery and the Union Dairy Company can be found below.

Most companies have announced headline prices, based on weighted averages.

But Milk2Market commercial development manager Richard Lange said what really mattered to farmers was what each processor was willing to pay for fat and protein each month, as detailed in the MSAs.

He said processors were using very different weightings, with some such as Fonterra paying 1.4 times as much for protein as fat, while others such as Coles were paying 1.23 times as much.

“It means farmers need to make sure they’re comparing apples to apples, with their income estimates, and be aware of the various incentives and charges that can make a difference to what they get in the pocket,” Mr Lange said.

In the lead-up to deadline day this time last year, a number of processors revised their figures as it became apparent that supply would be tight across southeastern Australia.

EastAUSmilk co-chief executive Eric Danzi urged farmers to closely examine the fine print of milk supply agreements.

“I urge all dairy farmers not to be rushed and explore your options with all processors before signing a contract,” he said.

“Given the milk shortages and cost increase, farmers should expect at least an additional 10c a litre. Do not consider signing any contract with less than a 10 cents a litre increase and without exploring all options.”

Check out the contracts on offer at the links below: