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Milk price rise motives questioned

by
August 08, 2017

: Fonterra’s Stanhope plant.

A step up in the farmgate milk price Fonterra offered has been welcomed.

But there is still a way to go for the major processor to restore trust with suppliers.

Katunga Fonterra supplier Peter McIntosh also questioned the processor’s motives in its latest step up of 20¢ to an average full year milk price of $5.50.

Fonterra last week updated its forecast closing season milk price to $5.80kg/MS for the 2017-18 season.

Fonterra Australia managing director René Dedoncker said improved market conditions and the strength of the Australian business supported this step up.

‘‘Since the start of this season our milk pool has grown and our assets are nearing optimal capacity,’’ Mr Dedoncker said.

Mr McIntosh said this latest announcement was great, but questioned whether it was market driven.

‘‘It’s got to be competitive advantage they’re looking for,’’ Mr McIntosh said.

‘‘No questions Fonterra would prefer to be the leading processor in Australia.

‘‘We are supposed to be naive enough to accept that this is simply a market-driven variation in price?’’

Mr McIntosh questioned whether it was in the industry’s best long-term interests to see Fonterra take advantage of the situation with Murray Goulburn and press for commercial dominance.

However, he said he was happy to accept Fonterra’s price offer, arguing if it benefited suppliers in the short term, it was not a bad thing.

United Dairyfarmers of Victoria president Adam Jenkins welcomed the price step up as positive in ‘‘returning cash back into farmers’ pockets’’.

‘‘And that also sends a signal that the global market is becoming more stable and in balance, which is good news for farmers,’’ Mr Jenkins said.

But Mr Jenkins said the step up remained market driven, and stressed the importance in the farmgate milk price needing to reflect market prices.

‘‘We don’t want to get too much divergence from that,’’ he said.

Mr Jenkins remained confident the latest development did constitute a fair reflection of the market.

He described such welcome and timely price improvements as incremental steps in rebuilding trust with suppliers.

‘‘I still think there’s a long way to go, it’s a small step forward,’’ he said.

‘‘It will be over a number of seasons we see trust and confidence come back into the supplier base.

‘‘Signs are looking much firmer than 18 months ago.’’

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