Chart Update, page-18780

Let me give this a go. This has more to do with SM1 than A2M. A2M don’t deal with production hence farmers and milk intake price . On a side note , Commodity Bulk milk powder( End product of farm gate solids and main product of Synlait) price has gone up 40% since 2020, and commodity bulk powder is a bit more concentrated than farm gate milk solids and fetches a better margin. So I would think a 15% increase in bulk powder >> 15% increase in farm gate solids cost let alone a 40% increase.

It possibly takes 25-30 kg farm gate solids to produce a 20 kg bulk . 2kg solids to produce a 900 g IF? I don’t know what sort of contract SM1 has with A2M , quite possibly a fixed contract on $/tin. And SM1 can easily absorb that with a rising bulk price.

On a fresh milk front , I don’t think it affects that much. As 1) A2 is not a producer 2) A 15% increase in farm gate milk solids. How many litres of milk will it be needed to produce a 1 kg solids? I don’t know. May be 5L -10L or greater ? Spread that 15% across 10L , is it significant cost increase In fresh milk ? I don’t think so.

Fonterra got the margin squeeze because they’re coop producer business . They deal with farmers and mainly produce low margin bulk powder & other finished products such as milk and possibly cheese etc. The bulk might help Fonterra a bit but can they raise the price of cheese and other low margin direct consumer powder product willy nilly ? And with that 40% increase in bulk , how much margin squeeze is Fonterra talking about? May be just a bullet point of many others in the presentation.