Fonterra chief executive Theo Spierings is expecting a more positive result for the co-operative’s Australian operation this season now that the market has a more realistic milk price.
The operation was going through a three-year? transformation plan and until lately, Fonterra had to match its milk price with rival Australian company Murray Goulburn because of contractual obligations, which was at A$5.60 a kilogram milk solids and forecast to reach A$6/kg MS.
In response to a farmer’s question at a special meeting held last week in Hamilton, Mr Spierings said he had “severe questions” about the sustainability of the milk price being offered. Fonterra had calculated that price at A$4.75/kg.
“I can imagine that $1.25/kg of milksolids not earned in the market but paid was not possible,” he said.
The reality farmers faced when the price eventually dropped was “very sad for farmers”.
“We cannot and will not pay more than what we have earned in the market,” Mr Spierings said.
The milk price was now at a level that it should be, he said.
“We have a crystal clear milk price manual which is one of the biggest assets we have and discrepancy in the milk price in Australia leads to inefficiencies, over-capacity, excess costs, you name it.”
Fonterra Australia has told suppliers in May it was revising its payments from A$5.75/kg to A$5/kg.
By: Gerold Piddock
Source Adf.farmonline.com.au
