Bega Cheese has announced a farm gate milk price increase of 14¢/kg milk solids for 2018-19.
Bega said the increase amounted to a lift of .09¢/kg butterfat and 0.1¢/kg protein, as a loyalty payment from February 1 to June 30.
Bega chairman Barry Irvin said the current industry conditions were challenging.
‘‘The prolonged drought in almost all of NSW and south-east Queensland has impacted all in the industry,’’ Mr Irvin said.
‘‘Significant cost increases in fodder and water, particularly in northern Victoria, combined with dramatic increased costs in electricity have added a great deal of business pressure.
‘‘Overall industry milk production is estimated to be reduced by as much as 500million litres in the current year, with northern Victoria estimated to be 1.6billion litres of milk.
‘‘The result is that competition for milk is fierce with all players keen to secure volume.’’
Mr Irvin noted an improvement in global markets and a decrease in the relative value of the Australian dollar, which was a positive development.
The industry was also seeing the benefit of decreasing stockpiles in the EU skim milk powder.
‘‘While there is significant competition in all regions it is particularly the case in northern Victoria as market milk companies seek to procure supply no longer available in NSW and south-east Queensland,’’ Mr Irvin said.
‘‘It has been good to see an improvement in global markets and a decrease in the relative value of the Australian dollar.
‘‘These changes are positive for our competitive position into the future and we are beginning to see the benefit of a decreasing stockpile in the EU (skim milk powder) which should see the market increasingly come back into balance, improving the price opportunity.
‘‘It is important in difficult circumstances that the company does what it can beyond milk price in an endeavour to provide support and supply options.
‘‘The company has been discussing the ‘9/3’ pricing system with suppliers over the past few months. The ‘9/3’ price system will provide a more seasonal option for our farmers and will be launched in the 2019-20 season.
‘‘We of course recognise the significant impact of the drought, particularly in northern Victoria with major increases in water prices; we will continue the seasonal support initiative in that region including the water rebate announced in September 2018.’’
Bega Cheese has suffered a declining share value during the past six months.
Since a high of about $7 in October, the shares have fallen to about $4.92 last week.