The head of Canadian dairy giant Saputo has defended the company’s opening milk price – described by one dairyfarmer as ‘dismal’.
Saputo chief executive Lino Saputo junior, in Australia for supplier meetings, said the $5.75 kilogram/milk solids opening price was responsible.
“We think $5.75 is a very good indication of where the current international markets are at, right now,” Mr Saputo said.
“At the end of the year, we are going to be paying leading prices for dairy.”
The company acquired Murray Goulburn in April.
He said this year’s opening price was higher than last year’s, yet dairy markets were trending lower.
“I think it is a pretty aggressive opening price,” Mr Saputo said.
“It’s a reflection of where we see the markets today, but I do remind the suppliers to focus more on the closing price than the opening price.”
GDT influence He said Saputo watched the Global Dairy Trade, which fell five per cent last week, closely.
“The GDT is extremely important, in the function of what we can pay for solids,” Mr Saputo said.
“I guess you are confirming our opening price was actually a good opening price.
“It would be ill-advised, and perhaps not prudent, to give the wrong indication of where the markets are at."
Supplier meetings Mr Saputo said the supplier meetings, throughout Victoria and Tasmania, were intended to give an indication as to the decisions behind the opening price.
“I reminded suppliers this is the second highest opening price in 10 years, so it’s not such a bad place to start,” he said.
He said step-ups would be reviewed on a quarterly basis.
“We will take a look at the international markets, on a quarterly basis, and as those markets get better around the world, then we will definitely take a step up if there is justification to do so," he said.
“But we will review that quarterly, we will not do that weekly, or monthly.”
Step-ups flagged He said step-ups would be based on publicly available information as well as indications from economists.
Mr Saputo denied rumours that Murray Goulburn had lost milk since Saputo took control.
“In fact, we are ahead of where we were last year by about 30-40 million litres,” he said.
Some suppliers had come back to MG, as it aimed to lift supply to 2.2 million litres, in the next two to three years.
“This is not a sprint, it’s a marathon,” Mr Saputo said.
"We believe in doing the right thing, every day, and it might take us some time to convince other suppliers to come back.
“But I think if we are consistent with our message, if we are transparent in our approach and we treat our suppliers with respect and loyalty, ultimately they will find we are the best home for their milk.”