![PAYMENT CHANGES: Saputo and Bega have flagged changes to the way they will pay their farmers, with both companies saying they are seeking to make them simpler. Saputo chief executive Lino Saputo has previously said the company wants a consistent, transparent approach, treating suppliers with respect and loyalty. PAYMENT CHANGES: Saputo and Bega have flagged changes to the way they will pay their farmers, with both companies saying they are seeking to make them simpler. Saputo chief executive Lino Saputo has previously said the company wants a consistent, transparent approach, treating suppliers with respect and loyalty.](/images/transform/v1/crop/frm/7f5GEYimwWveccZe67yRBS/ebbdf21a-0909-4ff9-8744-e5e157d035ac.jpg/r157_134_5040_3102_w1200_h678_fmax.jpg)
Saputo Dairy Australia and Bega Cheese have flagged changes to the way they intend paying their farmers.
Saputo has told farmers it intends to introduce a more straightforward seven-five system, with payments, on average, being up to 16 per cent higher for January to the end of July.
Farmers said they'd been told payments would be lower in the remaining five months of the year, until the end of December.
"From July 1 we will introduce an integrated pricing program and quality standard for our suppliers," a Saputo spokeswoman said.
"By combining best practices and taking feedback into account, we believe the new structure is more simple, transparent and fair."
Meanwhile, Bega Cheese has announced it'll got to a 9/3 payment system, with a differential of 50cents kilogram/Milk Solids, between the spring months (September to November) and the remainder of the year.
"This is a simple payment system, that increases early season cash flow an encourages farmers to produce milk at a time that suits their farm business," Bega chief executive officer Paul van Heerwaarden told farmers.
"There are only two prices spring, and out of spring."
Bega also announced an opening price of $6.60kg/MS, an increase of 12.8per cent on last year, and that it would continue its Bega Supply Premium and northern supplement, of 20c kg/MS, in light of seasonal conditions.
"In addition, northern Victorian farmers will be eligible for an irrigation supplement of a further 20cents kg/MS, on top of the opening price.
"The supplement will be paid monthly and is in support of current seasonal conditions," Mr Heerwaarden said.
The supply premium of 25c kg/MS (two year) or 50c kg/MS (three year) for new suppliers.
Mr Heerwaarden said the opening price reflected a whole of financial year, volume-weighed average price for Bega Chees' forecast Victorian supply.
Cautious welcome
Saputo suppliers have generally reacted favorably to the proposal, although they said they were also keen to see an opening price.
"As far as a price, there's been no offer at all, so far this year," Gippsland producer Douglas Hanks, Stony Creek said.
"They are saying there is another price review in June, but June's a big month."
"The only explanation was that it's going to be more beneficial for the average family farm," Gippsland producer, Douglas Hanks said.
Saputo and Bega are echoing the pricing structure of Australian Consolidated Milk, which announced a floor price of $7 kilogram/Milk Solids for nine months, and $5.50kg/MS for September, October and November.
Mr Hanks said it appeared to be a worthwhile change, resulting in less variation in payments.
But he said he didn't think it would necessarily sway farmers to switch to Saputo or stay with them.
"Because I am a co-operative man, through and through, I don't think any payment system is going to be different - it all comes back to cash in hand."
He said he was also wary about being able to return to Saputo, if he left the processor then wanted to come back.
"Because I am a spring person, I'd love a higher price," Mr Hanks said.
"The reality is spring milk goes into commodities, it's not going on the shelf, so I can't chase those high prices."
Colin Wientjens, Nerenna, near Leongatha, said the new system would suit spring calvers.
"What's happened with the industry is people have been incentivised to produce milk, out of season."
He said the previous system was based on a weighted average.
"The way the new system looks is that they will pay for however much you have produced in a certain month," he said.
"It's heading in a direction that you will get paid for what you produce, when you produce it.
"Back in the day, that's how it used to be."
Reduced risk
He said it appeared Saputo was reducing risk.
"Farmers have built more risk into their businesses and not necessarily made more money, at the same time the money has been taken away from people with low-risk systems."
Saputo is also believed to have taken out the excessive productivity bands and included them in the base price.
When it bought Murray-Goulburn Saputo pledged its milk price had to be at least the average of the two biggest processors.
Peter Young, Buffalo, said he expected Saputo to come up with an opening price, around June 15.
"I quite like the look of the new system," Mr Young said.
"It will be easier to work out, I'm a split calver, but the majority is in spring.
"My income should be similar, but we're getting the money a lot earlier, so that's going to help."
He said it would make budgeting easier.
"For most people, it will be easier to run their businesses," he said.
"The big thing is the opening price.
'What they are going to close at is what I'm interested in, as well."
The proposal comes as western Victorian and South Australian processor Union Dairy Company has announced an opening farmgate milk price range of $6.65 to $6.70cents/kilogram Milk Solids, up about 15 per cent on last year.
Directors Dean and Colin McKenna, and chief operating officer Andrew Wellington told suppliers they had opened earlier than expected to give farmers a better opportunity to plan for the coming season.
"This is a lift of around 15pc, based on last season's opening of $5.80kg/MS.
"The current farm gate average price, with fixed incentives, is $6.29kg/MS, which we will review, once we have a full wash up at the close of this season."
They said markets were sluggish, in the first half of the season, but there was much more optimism now, for its remainder.
UDC said it had also tweaked its milk model to reflect what the markets were chasing.
'Fat is in demand and given that it's approximately 50pc of our product mix, this will allow us to reward suppliers much better, under the new model.
"We understand the new model is not a perfect fit for all, and so our field staff will be visiting all existing suppliers to work through any concerns to resolve them, so you are no worse off."