Saputo, Bega pricing changes

Dairy processors Saputo and Bega flag payment changes

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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.

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Changes have been flagged to milk payment systems.

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Saputo Dairy Australia and Bega Cheese have flagged changes to their payment systems.

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.

Payments would be lower in the remaining five months of the year, until the end of December.

Meanwhile, Bega Cheese has announced it will go to a nine-five payment system, with a differential of 50 cents a 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 and encourages farmers to produce milk at a time that suits their farm business," Bega chief executive officer Paul van Heerwaarden told farmers.

Bega also announced an opening price of $6.60/kg MS, an increase of 12.8 per 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.

Saputo suppliers have generally reacted favourably to the proposal, although they said they were also keen to see an opening price as soon as possible.

"As far as a price, there's been no offer, at all, so far this year," Stony Creek, Vic, producer Douglas Hanks said.

"The only explanation was that it's going to be more beneficial for the average family farm."

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Saputo and Bega are echoing the pricing structure of Australian Consolidated Milk, which announced a floor price of $7/kg MS for nine months, and $5.50/kg 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.

"I don't think any payment system is going to be the difference it all comes back to cash in hand," he said.

He said he was also wary about being able to return to Saputo, if he left the processor then wanted to come back.

Colin Wientjens, Nerenna, Vic, 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," Mr Wientjens said.

"It's heading in a direction in that you will get paid for what you produce, when you produce it."

Saputo is also believed to have taken out the excessive productivity bands and included them in the base price.

Peter Young, Buffalo, Vic, 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.

"My income should be similar, but I'm getting the money a lot earlier, so that's going to help."

The proposal comes as South Australian processor Union Dairy Company (UDC) has announced an opening farmgate milk price range of $6.65-$6.70/kg MS, up about 15pc on last year.

UDC directors Dean and Colin McKenna and chief operating officer Andrew Wellington said they had opened earlier than expected to give farmers a better opportunity to plan.

"The current farm gate average price, with fixed incentives, is $6.29/kg MS, which we will review, at the close of this season," the three men said in a letter to suppliers.

Saputo has been contacted for comment.

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