BEGA Cheese has extended its current season farmgate milk price to the end of September.
The milk processor’s current price is $5.63 cents a kilogram of milk solids.
The extraordinary move was designed to give Bega Cheese suppliers “price stability for the commencement of the 2018-19 season”, according to a letter sent to suppliers.
“This means we will be paying the same pricing for July/August/Sept 2018 as we did in the same months of 2017,” the letter said.
The company said it would announce milk payments for October onwards before September.
Bega Cheese was also offering a once-off 50 cents a kilogram milk solids payment if suppliers agree to a three-year milk supply agreement, and 25 cents a kilogram of milk solids for a two-year arrangement.
Dairy consultant John Mulvany welcomed the early indication of the farmgate milk price for next season, particularly after some dairy analysts were suggesting low opening prices for 2018-19.
“It’s really good to have an indicative early price, even for part of next year,” Mr Mulvany said.
He said some farmgate milk price forecasts circulating in the industry “had an absolutely dispiriting effect” on dairy farmers.
“So the Bega announcement has countered some of that.
“My interpretation of next season’s milk price is that it doesn’t look too bad from where world markets are.
“The Bega forward price, which is a conservative position, is where I would consider milk prices to be heading, based on where the world price is.”
Mr Mulvany also supports the concept of a loyalty payment.
“I don’t have a problem locking into a relationship with a processor,” he said.
“Somehow, we have got to stop this cultural practice of factory hopping.
“It’s not good for anyone.
“It’s a complete distraction and creates uncertainty.”
Mr Mulvany said the only downside to the upfront payments offered by Bega was that the company was paying for milk not yet produced.
He said the forward payment was designed to help farmers with their cash flow.
“I wonder how much payment into the future we can do before we reach a point where we are not helping people,” he said.
“Dairy companies are then actually becoming the bank.
“We saw one big processor become the bank in the past few years and will no longer exist soon.”
By: PETER HEMPHILL
Source: The Weekly Times