NEW Zealand dairy giant Fonterra has defended paying its Kiwi farmers higher milk prices than its Australian suppliers for a third year running.
Local Fonterra suppliers are growing increasingly frustrated at what they see as an unwarranted price gap.
Farmer Power spokesman and Fonterra supplier Alex Robertson said Australian farmers were sick of being paid less than their Kiwi counterparts.
“The last two years we’ve been getting less than the Kiwis, and this season they’re (Fonterra) forecasting a close of $NZ7/kg of milk solids ($A6.48), while we’re being told the maximum close will be about $5.85 to $6.20 max,” Mr Robertson said.
“That’s a long way short of $6.48. The Australian dollar has also dropped since they opened, which should lift our price.”
But a Fonterra Australia spokesman said the commodity drivers differed on each side of the Tasman.
“The New Zealand price is based on a Five Commodity Model and is driven by Global Dairy Trade auction — predominantly whole milk powder — pricing, which means that prices move both up and down much faster than in Australia,” the spokesman said. “In comparison, Australia sells next to no product on GDT, and it is more a cheese-driven milk price, which hasn’t been as volatile.
“It’s also worth noting that while Australia doesn’t experience New Zealand’s extreme highs such as $NZ8.40, it doesn’t have extreme lows like $NZ3.90 either.”
Alvie Fonterra supplier Clint Theodore said Australia’s prices might be more stable, due to a greater share of milk going on to the domestic market, but much of the premium had been lost in supermarket discounting wars.
“Our milk should be worth a lot more on the domestic market,” Mr Theodore said.
“But the supermarkets have dropped milk and cheese prices to get shoppers into their stores to buy more expensive things. I guess Fonterra is just being more conservative here, so we don’t have to go through what happened two years ago.”
The Fonterra spokesman said the 2018-19 $NZ7kg of milk solids price was a forecast, which could move up and down in line with changes in the market.
“New Zealand has its advance rate — which means that NZ milk price payments begin the season conservatively (around 65 per cent of the forecast price), and progressively increase throughout the year.,” the spokesman said.
“Whereas in Australia, Fonterra’s opening price is typically 90-95 per cent of the upper end of the forecast full season price range.”
By: PETER HUNT
Source: The Weekly Times