Saputo opts to hold off on a step-up, despite improving conditions

In a letter to farmers, Saputo Dairy Australia said while markets had continued to show some improvement in the past few months, prices declined across commodities during the first half of the 2018/19 season.

Improvements included easing growth in milk production and a reduction in the EU's skim milk powder stockpiles.

"Consequently, following our April milk price review, we are maintaining our average milk price at $6.05kilogram/milk solids," the letter said.

"We will review our milk price again in June when we plan to announce the final closing price for 2018/19.

"Seeing the signs of a sustained recovery in the market provides an optimistic outlook that milk prices will improve in the season ahead."

But Dean's Marsh farmer Leighton Hart took to social media to question Saputo's decision, especially in the light of its purchase of Lion's speciality cheese business.

Read more: Saputo buys King Island brand and other Lion cheese lines

"These guys can't be serious," Mr Hart said on Twitter.

"They want milk for the coming season and can go out and invest another $250million in Lion, but can't find any money to invest into the supply base."

He said a price step up would help build confidence, going into the new milk season, due to the harsh conditions everyone was facing.

"The time we need an injection into our farm businesses is now - a helping hand would have been great," Mr Hart said.

"When processors are paying a bit more money, you can gain more confidence in what you are doing on farm."

High grain, hay and water costs had made for a very tough situation, for many farmers.

"If they are looking to open high, why not put some money out now?," he said.

"It doesn't really matter if it's now or the end of June.

"Saputo needs to look out the window at what's happening on farm and the need for extra income now."

Dave Weel, Simpson, said fellow farmers had discussed the lack of a step-up, in light of the Lion deal.

"They are thinking, 'that's where our step-up has gone', which has made them a bit more cranky," Mr Weel said.

"It's more important where Saputo finish, and that they come up with a good closing price.

"But they could have given us a small one now and a small one later, instead of a big one at the end of the year."

Joe McLaren, Warrnambool, said every farm was different, and a further step-up could have helped some producers.

"But it's liveable, we can make money at $6.05kg/MS," Mr McLaren said.

"It will be good if they can maintain it, at least we can put a budget to it."

He said recent rain would also help grow feed and reduce the reliance on bought in fodder.

Waaia's Edan Cockerell said he wasn't surprised Saputo had not increased its milk price.

"I don't think anyone would knock back a step up, it's always handy to get one," Mr Cockerell said.

"But I'm not really surprised

"They're running in line with the cash flow forecast they had at the beginning of the year, so there was no reason to move."

A step-up would have paid for water, for the annual autumn pasture start-up

"But we've already spent it, so it's business as usual."

Meanwhile, Burra Foods has announced an opening farmgate milk price of $6.40-6.70/kgMS for coming financial year.

Burra Foods Chief Executive Officer, Grant Crothers said it represented a 14.5percent increase on the opening price for the current financial year.

The opening price was also released on May 1, significantly earlier than ever before.

"The price is supported by our confidence in demand for the Burra product range and current outlook for commodities," Mr Crothers said.

The timing of the announcement was a direct response to requests from farmers for earlier 'next season' price signals.

"The opening farmgate milk price range reflects the cash price received by a large majority of supply partners regardless of whether they have already received the FY20 annualised portion of their Commitment Bonus," he said.

"It excludes any portion of milk solids committed to the Fixed Farmgate Milk Price and is an opening price that may increase by way of retrospective step-ups during the season," Mr Crothers said.