Mr Jenkins praised Fonterra’s strong opening price of $5.30 per kilogram of milk solids (kg/MS). But he was critical of the processor, and Bonlac Supply Company (BSC), for public statements indicating a higher available opening price of $5.70 kg/MS.
The higher price comes from a 40 cent loyalty payment, borrowed from future earnings, as a way of compensating existing, retiring or recommencing suppliers for a disastrous 2015/16 season.
“Fonterra has publicly announced an inflated opening price which does not reflect the current market price and is not available to new suppliers,” Mr Jenkins said.
“The comments are nothing but misleading, and at a time when the dairy industry has committed to rebuilding trust along the supply chain - they are unhelpful in our effort to create a transparent milk price for the dairy industry.”
Mr Jenkins said the statements showed inconsistencies in behaviour by Fonterra and BSC, after neither company recognised the benchmark return set by Murray Goulburn last year at $5.53/kgMS. “Fonterra wants to give the appearance that they are offering a more attractive price than any of the other processors at $5.70/kgMS, but it’s simply not true and Fonterra and BSC need to make that clear,” he said.
Meanwhile, BSC confirmed it was moving to distance itself from Australia’s largest processor, Murray Goulburn (MG).
BSC chairman Tony Marwood said it no longer saw the current Benchmark Agreement, against MG, as appropriate in today’s market.
“Fonterra has shown that it is running its own race by setting a price based on its own product mix and what that mix earns in the market,” Mr Marwood said.
“We’ve been working with Fonterra on a new price mechanism that will give farmers greater clarity as to how their price is set.”