Lactalis Australia, which owns Harvey Fresh, increases minimum farmgate price offer for dairy farmers

Lactalis put a Schedule B of new monthly prices for WA up on its website last week, adding four cents per litre to minimum farmgate prices it had published on its website on June 1.

Its new prices, to apply from July 1, range from 50.57c/L in September and October during the spring flush, to 68.58c/L during January and February, when milk production normally falls off and cost of production increases due to dairy herds requiring more supplementary feeding over summer.

The Harvey Fresh minimum farmgate average price across 12 months is now 59.89c/L, which still trails major competitor Brownes Dairy's 64.4c/L average, with Brownes' farmgate price range from 50c/L for September to 74c/L for January, February and March.

However, dairy farmers who sign a four-year exclusive contract with Lactalis to supply Harvey Fresh can improve their minimum payment by 1.5c/L and if they supply more than 340,000 litres a month they can add a further 2c/L to the farmgate price under a "volume adjustment" which offers additional payments for farmers who exceed volume benchmarks.

Brownes, in its standard-form supply agreements published on June 1, did not offer loyalty or volume incentives and off ered three years as the maximum term for its suppliers to lock in prices.

Apart from higher minimum prices, the Schedule B Harvey Fresh standard-form supplier agreement was identical to the one published on June 1 to comply with the national dairy code of conduct.

Farmers who produce milk with a bacterial cell count of less than 150,000 per millilitre for Harvey Fresh will have their monthly payment adjusted upwards by 5 per cent when they achieve the low cell count - worth about 3.42c/L in January and February and about 2.52c/L in September and October.

Brownes offered a flat 3c/L premium for milk with a cell count below 150,000/ml.

As reported last week in Farm Weekly, Lactalis offered farmers less than Brownes in an additional payment for above-average (3.8 per cent) butterfat, but more than Brownes by a slightly larger amount for above-average (3.2pc) protein content.

Lactalis has indicated it is seeking to purchase 150 million litres of milk next financial year in WA, which is about 30mL more than it is purchasing in the current financial year and would make it the biggest milk processor in the State.

Brownes is seeking a total of 140mL next year.

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Lactalis general manager beverages and milk Mal Carseldine said the aim of increased prices in Schedule B was to "protect our milk supply by retaining the farmers we already have and hopefully attracting some new ones as suppliers".

"We want to build both our domestic market share and export markets," Mr Carseldine said.

"We also need to ensure the (WA) dairy industry remains viable."

As well as processing and bottling Harvey Fresh brand milk products, some of the milk Lactalis buys from WA farmers is processed and packaged as Woolworths own-brand milks.

Lactalis also processes UHT (ultra high temperature processed long-life) milk at its Harvey factory which it exports under the Harvey Fresh brand.

Coles is also looking to increase the volume of milk it buys direct from farmers across Australia by 50mL.

It is seeking an extra 12mL of that from local farmers, taking its WA commitment to 42mL.

Based on the latest price offers to WA dairy farmers, Coles appears to have offered the best prices, with Brownes, Lactalis and Bega Dairy and Drinks - which under a toll arrangement processes and packages milk bought by Coles for Coles own-brand milks - all offering similar pricing but with variations which might benefit some farmers more than others, depending on operation size and milk production curve.

For its second year of buying milk direct from WA farmers, Coles has introduced non-exclusive supply contracts for the first time and will allow farmers who signed two and three-years contracts with it last year to sign new contracts this year so they can take advantage of the new higher prices it has offered.