Fonterra ups Aus payout

Fonterra suppliers in Australia have got some good news:

Fonterra Australia has stepped up prices for its Australian suppliers to an average weighted price of $6 a kilogram milk solids.

Suppliers were notified on Friday of the step up of 12 cents/kg fat and 30 cents/kg protein to reach $6kg/MS, which will be paid June 15 and backdated to July.

The price brings Fonterra’s price to the same as other major processors Murray Goulburn and Warrnambool Cheese and Butter.

The announcement came just one day after Fonterra cut the forecast price for its New Zealand suppliers to NZ$4.40/kg MS.

It also comes a week after Fonterra Australia announced that its Fixed Base Milk Price scheme for 2015/16 would be $5.80/kg MS, 42 cents lower than the 2014/15 price. . .

No doubt there is a reason for Fonterra Australia’s suppliers getting so much more than Fonterra’s New Zealand suppliers. If you can explain it, please do.

7 Responses to Fonterra ups Aus payout

  1. Because around half of Australia’s milk goes to the relatively stable domestic market, Aussie farmgate prices don’t go as high or as low as Kiwi prices do.

  2. farmerbraun says:

    The prices mentioned above are scarcely adequate recompense for the year -round production that is common throughout Australia

    NZ farmers collecting the winter premium , and the organic premium are receiving well over $7/Kg M.S. for the relevant milk production.
    That is well down from the more than $10/kg M.S. that they received last year.

  3. Paranormal says:

    Sigh – from the article you linked to DK:
    “Comparing Tatua with Fonterra is not an “apples with apples” exercise.”

    i wonder if you just pepper links without bothering to read them yourself because you realise most of us won’t waste our time on them.

    Just imagine what would happen to the prices of the specialty products Tatua trades in if Fonterra ‘diversified’ and went into them. Here’s a clue to start you off – look at the difference in milk volumes between the two companies in the article you linked to.

  4. Dave Kennedy says:

    Paranormal, we may have had this discussion before. Nestle manages a diverse product range successfully and Fonterra is trapped because they have concentrated on milk powder and have little else to fall back on. Of course we are not comparing apples with apples, we are comparing smart growth to a company that relies on all its eggs in one basket. Fonterra didn’t have to spend millions on lots of new fossil fueled driers and hope that dried milk returns would last forever. It isn’t about volumes, it is about diversity.

  5. Paranormal says:

    Have you ever visited any Fonterra manufacturing sites DK? I have. From this I know they are actually more diversified in their product mix than Tatua.http://www.fonterra.com/global/en/NZMP+Ingredients/Our+Ingredients Where Tatua are focused on a small range of high risk products. As a small producer it works for them.

    As you’re such an economic genius now, perhaps you could tell us how supply and demand would change when the worlds largest dairy exporter changes the emphasis on product mix.

    If you learn a little more about Fonterra you would understand how in times of high dairy prices their manufactured products suffer, however it is times when the raw milk prices drop the manufactured products become more profitable and boost the dividends back to the farmer.

    At the end of the day Fonterra is a cooperative owned by the producers. Given your political predilection i thought you would be all in favour of a company with this structure.

  6. Dave Kennedy says:

    Paranormal, you seem to attribute all I say as being my thoughts alone. They are not. In the past I have linked to multiple sources who have expressed the same view and i am just repeating them because to me they make logical sense. When milk powder is being produced in greater volumes by international competitors it is unlikely that returns will remain high and will likely fluctuate, this is a natural consequence of low value commodity markets.

    Most of our dairy investment has been concentrated on increasing milk volumes (this can’t be denied as the Government has made this a goal) rather than investing in developing new product lines. I am not saying that R&D and exploring new markets isn’t happening, but there isn’t enough emphasis put on it.

    In talking to many dairy farmers there is a level of frustration that despite being a cooperative there was an element of bullying to get Fonterra established and the consultation between the company management and the farmers isn’t always as good as they would like. The strength of the cooperative is also being weakened by the shares being made available to outside investors and the erosion of farmer influence. The management is also sucking up a considerable amount of the company revenue with extremely high salaries being common. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10845127

    Fonterra has been hugely instrumental in achieving market gains because of its size and capacity, but it is also makes it vulnerable if it is reliant on a limited product range as revealed by their interim report: http://www.fonterra.com/wps/wcm/connect/cb07d698-18f6-41b0-b6a0-48052c25e219/Fonterra+Interim+Report+-+Low+Res+-+FINAL.pdf?MOD=AJPERES

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