New Penola milk plant takes price lead

Opening soon: The Union Dairy Company's milk plant at Penola during its construction phase.

Opening soon: The Union Dairy Company's milk plant at Penola during its construction phase.

THE Midfield Group is making a bold play to attract more dairy farmers to supply its new milk powder plant in Penola that is due to open next month.

Midfield, which has built the new Union Dairy Company (UDC) plant in a joint venture with global agribusiness company, Louis Dreyfus Dairy, is offering an opening price of $5.50 a kilogram milk solids plus a 25c a kgms sign on bonus to suppliers.

It has also lifted its milk supply target for its first year of operation from 200 million to 250 million litres of milk.

Midfield dairy operations director Daniel Aarons said it had not yet reached its target and was still actively recruiting suppliers.

Mr Aarons said the prices offered by UDC should put it ahead of its competitors. 

Its $5.75 price is well above that of Murray Goulburn (MG) that is offering an opening price of $4.70kgms and a forecast closing price of $5.20-$5.40kgms.

Warrnambool Cheese and Butter’s (WCB) opening price is $5.50kgms while Fonterra’s is $5.30kgms with a 40c kgms payment for continuing and new suppliers.

MG’s price, which previously had set the benchmark for the industry, now trails that of most other dairy processors and led Midfield to reassess the way it had planned to set its opening price.

UDC had planned to offer a guaranteed minimum price that would be an average of the opening price of the three major south-west dairy processors plus a volume premium payable from the start of the season.

However Mr Aarons said MG’s opening price would have pulled down too far the average price that UDC offered and it amended its offer to be more competitive.

“It’s now close to the average of the highest two of the three (major south-west processors),” Mr Aarons said.

He said half of the 25c kgms bonus for those who signed on with UDC would be paid up front in suppliers’ first milk cheque, giving them an average of $10,000 for every million litres of milk they supplied.

“There will be a reconciliation at the end of the year to ensure farmers get the 25c kgms on top of the average of the prices paid by two highest of the three (major processors),” Mr Aarons said.

He said the new $80 million plant was finished and was expected to begin processing milk in the next few weeks.

Currently the greater portion of the plant’s milk supply was coming from western Victoria but negotiations were underway to secure more supply from South Australia, Mr Aarons said.

The plant, which has employed 40 people, will principally produce skim milk powder to overseas markets including Asia, United Arab Emirates and North Africa.

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