Milk Production 2016 and Fonterra Milk Intake

Collection Overall Production
by Fonterra in Australia
Jan: -5% -4%
Feb: -3% -5%
Mar: -7%
Apr: -5% -3%
May: -18% -6%
Jun: -26% -6%
Jul: -22% -10%
Aug -10% -9%
Sep: -9% -10%
Oct: -10% -11%
Nov: -1% Continued decline trend
Dec: +1% Continued decline trend

Sep to Jan is the peak season for milk

In Dec 2016, Fonterra confirmed $5.70 AUD ($6 nzd/kg of milk), with no profit sharing for Australia farmers.
In Oct 2016, MG confirmed $4.95 AUD/kg. Australia Farmers will get their share of MG profit.

No Doubt, Fonterra has been able to offer higher milk price, due to its efficiency and stronger profit margin than MG.
However, MG is undertaking cost-reduction program to save up to $55 million annually by 2018.
At the moment, MG profit margin is 1.5%, compared to 4.8% of Fonterra. There's certainly room for cost-reduction.

Despite of what media and people say about the scandalous price-cutting to famers by Fonterra,
"the fact" that Fonterra can even increase its milk intake against declining milk production in Australia by offering more attractive FMP shows that FMP price has such a pivotal influence in attracting farmers and mending farmer-supplier relationship.
Supplier-switching is common and farmers are no more and no less royal to a particular dairy processor. Whoever pays the best, more farmers will switch to them.

MG is only 1/6 the size of Fonterra. It profit margin can be improved a lot easier through higher margin Dairy product. Once MG profit is improved and offers higher FMP to farmers. For sure, farmers will be back.