THE south-west dairy industry has suffered a double blow with Fonterra Australia on Thursdayannouncing it will cutits milk price for thefull 2015-2016 season by 10 per cent from $5.60 a kilogram milk solids (kgms) to $5.
The big cut in incometo hundreds of Fonterra suppliers in the south-west comes a week after Murray Goulburn also slashed the price it pays its hundreds of south-west suppliers by up to 20 per cent.
The cutscome when many dairy farmers are already struggling with high feed bills because of the late autumn rainsand arelikely to leave many wondering about their future in the dairy industry.
Fonterra’s Australian managing director Judith Swales said it wasa “horrendous situation for everyone concerned”.
Ms Swales said although Fonterra had been warning its suppliers to be cautious and conservative with budgets this season, it could have done more.
She said it would strive to give suppliers better signals about the dairy market next season.
Fonterra could not cut the price sooner because it was obliged under its Bonlac Supply Agreement to meet the benchmark price. In other words, it couldn’t move unless Murray Goulburn did.
The loan will give suppliers the equivalent of $5.60 per kgmsfor the current season.
Fonterra Oceania managing directorJudith Swales said “the reduction in the farmgate milk price is the last thing farmers want to hear – however, it is unlikely to come as a surprise.”
Ms Swales saidthe price change reflected the reality of the oversupply in global dairy commodity prices andthe recent strength of the Australian dollar.
“Fonterra will continue to meet the minimum benchmark milk price, as per the BSC Agreement,” Mr Marwood said.
“From next season this will be exclusive of the deductions that Murray Goulburn is using to recover repayments from its farmer support package, equating to a minimum of 0.20 – 0.27 cents per kilogram of milk solids for three years.
“This is especially important as it is likely a low milk price environment will continue next season and gives farmers greater clarity of a market milk price,” Mr Marwood said.
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