Fonterra defends price cut

Dairy giant Fonterra has rejected claims it underpaidsuppliers.
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The New Zealand-based processor faced the dairy industry senate inquiry this week and defended its move to follow Murray Goulburn in cutting the forecast milk price earlier this year, sparked a dairy crisis.

Fonterra’s Australian milk supply managerMatt Watt said the companyhad been honest with its suppliers from the start.

“We were upfront with farmers that the milk price in Australia was not sustainable and did not reflect what could be earned in the market,” he said.

“We talked at length with our farmers about this dilemma, and they told us that because MG was paying $5.60… they expected us to hold at that level because of our Bonlac Supply Company agreement.”

South-west farmers have questioned whether the price cuts were too deep after learning MG suppliers received a higher price for their milk solids as at June 30, includingdividends.

Mr Watt said MG clearly stated in its annual report and at its general meeting that the final farmgate milk price was $4.80/kgMS andincludedthe debt owed from 10-months of over-payment.

“Fonterra’s average milk price for the 2016 financial year was ultimately $5.13/kgMS, which was 33c higher than the benchmark price,” he said.

BSC chairmanTony Marwood said the implication that Fonterra did not honour its agreement was incorrect and confirmed the processor’s actions were legal.

Crossley dairy farmerKarinjeet Singh-Mahil said there were so many things that didn’t make sense.

She said the debt being paid back to MG did not form part of the overall closing price because the debt was “carried bythe company”.

Ms Singh-Mahil said Fonterra needed to match MG’s closing price excluding the retrospective payments.

“If you want to compareapples with apples,the debt should sit with the company, not the supplierso there’s a 40c shortfall,” she said.

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