Bega Cheese and Saputo Dairy Australia-Warrnambool Cheese and Butter have announced milk price increases.
Saputo-WCB announced on Thursday it was stepping up its farmgate milk price by seven cents/kilogram for butterfat and 14c/kg for protein, lifting the amount it would pay farmers to $6.05c kilogram/MS.
The payment will be made with January 2019 proceeds, during February 2019
That’s up from $5.95c kg/MS.
“This payment is retrospective and applies to all qualifying milk supplied by current WCB and SDA suppliers from 1 July 1, 2018,” a Saputo Dairy Australia spokesman said.
Saputo also lifted its price in its NSW–Sydney market region by
8 cents/kg butterfat and 12 cents/kg protein.
This increases the average farmgate milk price for the 2018/19 season suppliers in the NSW–Sydney Market Region to 52.7 cents per litre, up from 52 cents per litre.
The Saputo spokesman said while world markets had seen some improvement recently due mainly to easing growth in milk production and a reduction in skim milk powder stockpiles in the European Union, prices declined across dairy commodities during the first half.
"As such, this price increase reflects our acknowledgement that farm conditions remain challenging for our suppliers and any sustained market recovery is still ahead."
"We will continue to monitor the market and review the milk price again in April 2019, in accordance with our quarterly review process."
Bega announced on Wednesday a milk price increase of 14c/kg milk solids.
Executive chairman Barry Irvin said the increase would equate to farmers receiving an additional $0.096c/kg for butterfat and $0.192c/kg for protein, as a loyalty payment from July 1 last year.
It would be applied as an increase for milk supplied from February 1 to June 30, this year.
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“The current industry circumstances are very challenging across the supply chain,” Mr Irvin said.
“The prolonged drought in almost all of NSW and south-east Queensland has impacted all in the industry.
“Significant cost increases in fodder and water (particularly northern Victoria) combined with dramatic increased costs in electricity have added a great deal of business pressure.”
Mr Irvin said milk production might drop by as much as 500 million litres in the current year, with northern Victorian production expected to be down by as much as 1.6-1.7 million litres.
That had resulted in fierce competition, with all players keen to secure volume.
“We must respond to competition and ensure we are competitive in every region we operate in,” he said.
Competition was particularly strong in northern Victoria, as milk companies sought to procure supply, which was no longer available in NSW and south-east Queensland.
Mr Irvin said Bega was also pleased to see improvement in global markets and a decrease in the relative value of the Australian dollar.
“These changes are positive for our competitive position into the future and we are beginning to see the benefit of a decreasing stockpile in the EU (skim milk powder), which should see the market increasingly come back into balance, improving the price opportunity,” he said.
Mr Irvin also said the ‘9/3’ pricing system would be launched in the 2019/20 season.
Meanwhile, a Fonterra spokeswoman said challenging drought conditions, increased culling, on-farm retirements and growing competition were all having an impact on milk collections this season
“This is a challenge that all processors are facing,” the spokeswoman said.
“We know that it’s tough everywhere, however, the direct effects of the drought are most apparent in northern Victoria, which has seen November production drop by 20.3 per cent compared to the same time last year.
“This compares to Gippsland where production has dropped by 4.2 per cent, and 5.5 per cent in Western Victoria.”
The spokeswoman to ensure a consistent supply of high-quality milk throughout the season in this region, Fonterra was talking to its eligible northern Victorian farmers, who were willing to commit to a minimum volume of milk through the year, which met strict quality requirements.