Company says it’s confident of overturning ‘significant majority’ of two-year cessation notices placed ahead of June.
Synlait’s 20c/kg retention payment for South Island farmer suppliers demonstrates confidence in the newly refinanced and stabilised milk company, it says.
“Our capital raise shore up the balance sheet and we are taking some of that to shore up the milk supply,” Synlait’s director of on-farm excellence, sustainability and corporate affairs, Charles Fergusson, said.
While the 20c/kg retention premium may not be large when compared with a $9 forecast, he said the increment is meaningful to the average Canterbury farm.
Payment will be made to those farms that don’t have a cessation notice in place on May 31, 2025, are supplying in the 2025-26 season and remain “un-ceased” until August 31, 2025.
The company is confident of overturning the “significant majority” of two-year cessation notices placed ahead of May 31, 2024.
Five South Island supply farms were lost to Synlait last season and 13 more this season.
Fergusson said suppliers change dairy companies for different reasons, including changes in farm ownership.
“Some bought a Synlait farm and are loyal to Fonterra, so they have waited out the two years.
“When someone gives you a cease notice, you spend two years trying to retain them, and you get a very strong sense of the reasons.”
Fergusson said the reasons for the latest batch of cease notices tended to be risk and Synlait’s performance compared with alternative processors.
Farmers have been clear in their expectations of Synlait to reduce its debt levels while paying a competitive milk price and strong advance rates.
“That’s why we are confident of overturning them, as we have satisfied a large number of the reasons for cessation notices,” Fergusson said
“Synlait’s premium farmers are relatively well paid, with an average of 28c over the farmgate milk price, including the A2 margin.”
Lead With Pride now covers 80% of all supply farms and is evolving towards environmental and greenhouse gas commitments.
“We want to overturn every cease notice and grow our milk supply,” Fergusson said.
North Island supply farms remain under contract and are being paid by Synlait, while their milk goes to Open Country.
They can leave Synlait to go to Open Country.
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