Bega cheese price hike warnings amid $40m COVID-19 bill as dairy farmers get boost
The price of Vegemite and certain milk, cheese and butter lines is expected to rise as Bega Cheese announces supply chain pressures and COVID-19 will cost the company more than $40 million over the course of this exercise.
- Bega Cheese said it would raise the price of its products due to rising input costs
- It also offered dairy farmers a record farm gate price due to strong world prices and a shrinking milk pool.
- It has warned investors that supply chain disruption and negative impacts from COVID-19 will cost it more than $40 million in FY22
This is despite the dairy and food giant reporting record revenues and rising profits just two months ago.
Bega Cheese executive chairman Barry Irvin said rising input costs and supply chain disruption will see some of its costs passed on to consumers.
The company has some of Australia’s best-known brands, including Vegemite, but has also recently added flavored yoghurts, juices and milks to its product range.
“The overall farmgate price is also increasing and that, of course, translates into an increased need for market pricing,” Irvin said.
Global supply pressures
He said the Russian invasion of Ukraine had increased input costs and new COVID-19 lockdowns in China were disrupting the flow of dairy products to major Asian markets.
“We sell a variety of products in China, mostly cream cheese, powders and lactoferrin, and a lot of that goes to the port of Shanghai,” Irvin said.
“[It] is currently very disrupted due to COVID-19 related lockdowns.
“The way I would look at this year is that while COVID was the big impact, there were other impacts that unfolded that kept us on our toes.”
Record milk price
Bega Cheese has announced a record farm gate milk price for dairy farmers in Victoria, South Australia and NSW.
Farmers in Victoria and South Africa will receive $8.40 per kilogram of milk solids (kgms) in the next financial year.
Farmers in the Bega Valley will receive $9kg, an increase of 16% over last year. Other regions should be announced in the coming days.
The farm gate price increase this year has been underpinned by strong global dairy prices and a shrinking milk pool in Australia, leading to fierce competition among processors.
The processor wanted to encourage its suppliers to produce more milk and stem the tide of departures from the industry.
Price hike welcome
Farmers welcomed the increase in the farmgate price while acknowledging the challenges of dealing with floods, inflation and labor shortages.
Bega Valley dairy farmer Robert Russell said it was “a terrific prize that will satisfy farmers”.
“$9 is really something, a huge leap,” he said.
After dealing with persistent flooding on his farm, Robert Russell felt a price hike was needed to offset rising costs.
“It was quite difficult last month with the wet weather in the mud.”
He said it had led to mastitis and foot pain in dairy cows.
“Costs of inputs, fuel and fertilizer in particular and some chemicals, all the gains have just been wiped out, and on top of that there are significant labor issues for a lot of farms,” he said. he declared.