Bega Cheese has put the weights on its bigger rival and the country’s biggest dairy dairy processor, Murray Goulburn, by setting an opening milk price nearly 20% above Murray Goulburn’s opening level
Bega revealed yesterday in a statement to the ASX it would pay an opening price of $5.50 per kilogram of milk solids, which was 10% higher than what it paid farmers a year ago.
While that’s higher than last year it is also lower than Fonterra’s opening price in NZ of $NZ6.15 ($A5.86) for the 2017-18 season.
But Bega’s price is 17% above the $4.70/kg price Murray Goulburn set just two days ago, when it also revealed it was launching a strategic review of its operations and capital structure including the controversial profit sharing mechanism, which links the milk price to dividends.
In its statement to the ASX on Tuesday, Murray Goulburn forecast a farmgate milk price of between $5.20 and $5.40 a kilogram of milk solids for the 2018 financial year, although the opening price has been set at a more modest $4.70.
Murray Goulburn was been traditionally the industry’s price setter in Australia, with rival processors such as Bega, Fonterra, Paul’s (Danone), Warnambool and Nestle offering prices in line or at times slightly higher.
But Murray Goulburn has fallen behind after 2016’s problems of price cuts, the confusion over advance payments and the complete miscalculation of global pricing and demand (especially in China) by the former management of the company.
That saw it lose 20% of its milk supply when farmers went elsewhere after Murray Goulburn retrospectively cut prices to suppliers and demanded repayment of some $150 million of loans or advance payments as profits slumped lower than expected Chinese demand.
Bega Cheese shares fell 2.08% to at $5.63, while Murray Goulburn’s MG Unit Trust fell another 4.5% to 63.5 cents, extending the slide of the slide since Tuesday to 25%.
