DAIRY farmers have been given a sneak peek of where next season’s milk prices could be heading after Fonterra Australia announced its fixed base price late last week.
The company is offering a base price of $5.90 per kilogram of milk solids for producers who choose to take up the Fixed Base Milk Price option for the 2018-2019 season.
The fixed-base agreement allows farmers to lock in a set price for up to 70 per cent of their milk supply.
The company says the option, now in its fifth year, can be a risk-management tool for producers and is aimed at helping reduce farmers’ exposure to market volatility.
Fonterra has locked in a 52-million litre pool of milk under the program, or about 2 per cent of its total supply.
About 100 farmers lodged tenders to supply up to 70 per cent of their milk to Fonterra.
A Fonterra spokeswoman said the volume of milk offered by farmers, about 130 million litres, doubled from last year.
Fonterra Australia general manager farm source, Matt Watt, said the strong interest in the fixed price option showed farmers were looking for greater price certainty.
“Certainty it can be particularly important for farmers at times when they are considering business investments such as expansion or undertaking a new conversion,” he said.
To determine volumes and prices under the fixed option, Fonterra uses a tender allocation process where farmers offer certain volumes of milk solids at a set price.
Many Tasmanian producers are now waiting for the season-opening milk prices to be announced by Fonterra and new industry player Saputo, which are expected sometime in the next few weeks.
Saputo has stepped up its 2017-2018 season price to $5.68/kgMS, saying it was “focused on building milk supply in Victoria and Tasmania as a priority”.
The payment is retrospective and applies to milk supplied by Warrnambool Cheese and Butter and Murray Goulburn suppliers from July 1 last year. It will be added to payments for April production.
By: KAROLIN MACGREGOR
Source: The Weekly Times