Bega first Aussie dairy producer to downgrade new season milk price forecast

Tuesday 21st June 2016

Australian-listed dairy company Bega Cheese has released an opening farmgate milk price for the 2016/2017 season of A$5 per kilogram of milk solids, claiming analysts are not expecting an improvement in dairy commodity returns until the first half of next year.

Fonterra Cooperative Group and Australia’s biggest dairy processor Murray Goulburn are yet to announce their opening forecast for the new season in Australia though last month Fonterra set an early price of $4.25 for New Zealand suppliers. That was up 35 cents on the forecast milk price for the 2015/2016 season. Murray Goulburn said it would release its opening forecast after a board meeting at the end of this month.

Bega Cheese stuck to its announced A$5.60/kgMS farmgate milk price payout in the 2015/2016 season despite its major competitors slashing the prices they paid for raw milk very late in the financial year, prompting calls from farmers for an independent review of Australia's dairy industry.

Murray Goulburn dropped its farmgate price from an average of A$5.60 to A$4.75-$5 in April for the 2015/16, after saying it would struggle to meet even half of the profit forecast in its partial float on the ASX less than a year ago.

Fonterra, which is obliged to at least match Murray Goulburn’s price under its Bonlac supply agreement, followed suit, cutting its 2015/16 season price from an average A$5.60 to A$5. The revised Australian milk price reduces the cost of goods sold for the loss-making Fonterra Australia by about A$48 million. Fonterra had already reduced payments for its New Zealand suppliers to $3.90/kgMS for that season.

Bega executive chairman Barry Irvin said the company could not insulate farmgate milk prices from the reality of the markets.

BusinessDesk.co.nz

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