Dairy farmers hit again

06 Jan, 2001 03:01 PM

NATIONAL Foods Ltd (NFL) milk suppliers in WA have been slugged with another drop in farmgate milk prices following the signing of new milk contracts that became effective on January 1,2001. One Brunswick dairy farmer said that, while he would receive a marginal increase of 1.4 per cent on contract volumes, he was losing three cents a litre, or 10 per cent, on his contract milk prices. The recent drop on his premium prices is equivalent to a fall of $22,000 of his farm income, and on top of 9c/L lost shortly after deregulation, helps bring to $82,000 he has lost in the past six months. His average milk price is now between 25.5-26 cents a litre, a fall of 10.5c/L, based on last year's production figures. The $1.6 billion national dairy industry restructure payments also haven't been able to keep up with the higher-than-expected losses. As a result of his $400,000 quota asset being cancelled on deregulation, he will receive $24,000 compensation a year over eight years. As this money is going into debt reduction, he is still left with a $82,000 yearly shortfall on contracted milk to date. Public Statement and Confidentiality clauses have been introduced to NFL contracts for deregulation to prevent dairy farmers from speaking to the media or revealing, among other things, milk prices to third parties (the "agreement" clause also remains in force three years after the contract ends). The NFL supplier, in the Perth to Brunswick zone, said 88 per cent of his 800,000L produced before deregulation was now included in his contracts with the rest subject to spot prices. These are also lower than the previous three months, down by 30 cents a kilogram to $1.69kg for butterfat and 54c/kg to $3.26 for protein, the losses included within the $82,000. His average spot milk price is now at 14c/L. NFL's spot milk prices are expected to stay low as the company accelerates plans to recoup an expected $40 million loss in earnings for this fiscal year. The fall in revenue came following deregulation when Dairy Farmers Group set a new floor price on drinking milk after severely undercutting NFL and other companies to secure major Woolworths house brand fresh milk contracts. NFL managing director Max Ould said at the company's annual meeting in November that, while they had budgeted for a lower revenue base this year, they had not predicted the "savagery" of the reduction with which they had to deal. As part of the cost recovery program, NFL was cutting its 2000-strong national workforce by at least 10pc, closing some facilities and scaling down others. This was already expected to have delivered $8-$10m in savings. NFL expects to make savings in WA after selling the Boyanup powder plant to the Challenge Dairy Co-operative in a deal that will see 20 million litres of fresh milk premiums flowing to the Co-op. ÿ


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