Dairy processors have been urged to follow the lead of the Norco company in paying step-ups to farmers.
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Dairy processors have been challenged on price step-ups.

The Queensland Dairyfarmers Organisation congratulated Norco on its announcement of a price increase of 2¢/litre from February 1.

The step-up takes Norco’s farm gate price for this financial year to just above 70¢ for its north-east NSW and south-east Queensland suppliers.

QDO executive officer Eric Danzi said farmers would be watching to see how Bega and Lactalis respond.

“It would be hoped that they respond in the coming weeks with a step-up of their own,” Mr Danzi said.

“If they do not, it will clearly communicate to farmers that Norco is prepared to make step-ups during the season while Lactalis and Bega are not.

“As a result, farmers would be wise to consider this in June when contracts are offered by all processors.

“That is, the price you are offered in June by Lactalis and Bega is the maximum price you will receive while with Norco there is a real prospect of step-ups.

“Clearly, this would create a real advantage for Norco in the minds of farmers.”

Mr Danzi said while Fonterra announced a step-up in mid-February for its New Zealand suppliers, with its 2020-21 forecast farm gate range of NZ$6.90 to NZ$7.50 kg/milk solids (A$6.52 to $7.09), “they have been tight-lipped regarding their intentions within Australia”.

“Bega, the recent purchaser of Lion Dairy and Drinks, has also been quiet about its intentions regarding its farm gate price,” he said.

“Bega suppliers in Queensland would expect to see a better approach to suppliers on a range of issues, including price, than Lion had.

“This should be made clear by June 1 when new contracts are developed by Bega.”

Mr Danzi said a lot of farmers were questioning whether the mandatory Dairy Code of Conduct had made processors gun-shy about mid-year step-ups.

“There is no reason that step-ups shouldn’t occur under the code, although step-downs are illegal except under exceptional circumstances,” he said.

“Some farmers are calling for the ACCC to investigate the lack of movement in the market.”

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