Norco leads the way in farmgate price step-up

Norco leads the way in farmgate price step-up

COMMENT
Dairy
Aa

With a step-up of 2c/l, Norco is now clearly paying above what Lactalis and Bega are paying in Queensland.

Aa

QDO would like to congratulate Norco for its leadership after its announcement of a price increase of 2 cents a litre from February 1 for the second half of the financial year. This takes Norco's average farmgate price for the 2020-21 financial year to slightly above 70 cents for its suppliers based mainly in north east NSW and south east Queensland. Norco will now pay a similar price to what it paid in 2019-20 and is now clearly paying above what Lactalis and Bega are paying in Queensland.

This is a positive step and it will be interesting to see how Bega and Lactalis respond. It would be hoped that they respond in the coming weeks with a step-up of their own. If they do not, it will clearly communicate to farmers that Norco is prepared to make step-ups during the season while Lactalis and Bega are not.

As a result, farmers would be wise to consider this in June when contracts are offered by all processors. That is, the price you are offered in June by Lactalis and Bega is the maximum price you will receive while with Norco there is a real prospect of step-ups. Clearly, this would create a real advantage for Norco in the minds of farmers. While Fonterra announced a step-up this week for its New Zealand suppliers with its 2020-21 forecast farmgate range to NZ$6.90-$7.50 kg/milk solids (A$6.52-$7.09), it has been tight-lipped regarding its intentions within Australia.

Bega, the recent purchaser of Lion Dairy and Drinks, has also been quiet about its intentions regarding its farmgate price. Bega suppliers in Queensland would expect to see a better approach to suppliers on a range of issues, including price, than Lion had. This should be made clear by June 1 when new contracts are developed by Bega.

A lot of farmers are questioning whether the Mandatory Code of Conduct has made processors gun-shy about a mid-year step-ups. There is no reason that step-ups shouldn't occur under the code, although step-downs are illegal except under exceptional circumstances. Some farmers are calling for the ACCC to investigate the lack of movement in the market.

I would strongly recommend any member who feels that their current contractual arrangements are unfair should contact QDO to discuss and we can raise any substantive issues with ACCC for them to resolve.

Aa

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