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The great “milk swap” is underway as Australian dairy farmers chase higher farmgate milk prices
July 19, 2017

The much anticipated milk swap is well and truly under way as dairy farmers chase higher farmgate milk prices.

Over the weekend some Victorian, South Australian and NSW dairy farmers moved their milk supply to alternative processors.

Mystery surrounds volumes and the numbers of suppliers who have shifted, but rumours are rife throughout the industry.

Fonterra Australia has confirmed it has taken on more than 50 new suppliers since July 1, with most of those in the past few days.

Murray Goulburn — the processor believed to have taken the largest hit to milk supply — said it would “provide an update on milk intake as required or at the time of our full-year 2017 results announcement on 22 August”.

Industry sources told The Weekly Times 100-150 million litres of milk — or about 50 farms — have moved from Murray Goulburn to other processors in Gippsland over the weekend.

Parmalat, Fonterra, Bega Cheese and Burra Foods are believed to have taken on the milk. Similar volumes are rumoured to have shifted in northern Victoria, the bulk of which is believed to have moved to Fonterra over the weekend.

Farmers have told The Weekly Times shifting processors would mean an income rise of between $60,000 and $300,000, depending on the size of the farm, calving pattern and processor payments.

Western Victoria is believed to have recorded the smallest amount of recent milk movement. This is due to many farmers having left last season to take up Fonterra fresh milk contracts or to move to Warrnambool Cheese and Butter, which held its price in the 2015-16 season when Murray Goulburn and Fonterra dropped their prices late in the season. Milk that has moved in this region recently has mostly gone to Fonterra.

Another wave of milk movement is expected mid next month as farmers finish Murray Goulburn Next Generation contracts while some are waiting for other payments due to them as incentives.

In South Australia, ASX-listed Beston Global Foods this month picked up supply from Parmalat and Murray Goulburn.

One supplier who had moved, told The Weekly Times it was a protest against former Murray Goulburn management, referring to decisions such as cutting the farmgate milk price in late 2015-16 as well as introducing the “clawback”, or milk supply support package, which was later scrapped and money returned to suppliers.

Other suppliers said they had no choice but to move, as the financial difference between processors was so great.

Early last month, when Murray Goulburn announced its first opening price of $4.70 a kilogram of milk solids for southern region suppliers, with a closing forecast of $5.20-$5.40kg/MS, Murray Goulburn chief Ari Mervis told suppliers the range was subject to “various assumptions”.

These included “dairy commodity prices, exchange rates, and achieving cost-out initiatives, as well as achieving milk intake of approximately 2.5 billion litres”.

“A fall below this intake level may impact this (farmgate milk price) range and we appreciate the important role each of our suppliers play in collectively contributing to a competitive future for MG,” he said.

Murray Goulburn has since revised its opening southern farmgate milk price to $5.20kg/MS and lifted the top end of its forecast to $5.50kg/MS.

This followed opening price announcements from major competitors of $5.30-$5.50kg/MS.

Some Murray Goulburn suppliers said they cannot move due to contracts with the processor. Others have chosen to stay because they support the co-op, while some are hoping their shares would be worth more as a current supplier.

Fonterra Australian general manager of milk supply Matt Watt told The Weekly Times:“To date we’ve welcomed more than 50 new farms across all regions.

“We’ve received a significant level of interest from prospective suppliers and we currently have a waiting list that we’re working through,” Mr Watt said.

“The new milk, along with growth from our existing and returning suppliers, will get us close to our capacity of two billion litres by the end of the season.”


Source: The Weekly Times


Summer 2018