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National Foods reaffirms price offer for Tasmanian farmers

National Foods has written to its Tasmanian milk suppliers today to reaffirm its milk price offer and to reject a new claim from the collective bargaining group that would cost in excess of ....

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November 27, 2009

National Foods has written to its Tasmanian milk suppliers today to reaffirm its milk price offer and to reject a new claim from the collective bargaining group that would cost in excess of $16 million more than the current offer from 1 January 2010.

National Foods has also reminded farmers that its milk price offer is the best in Tasmania and urges them to carefully compare the offer with the price other processors are paying, before the deadline of 30 November.

The letter, from Murray Jeffrey, General Manager Milk Procurement and Inbound Logistics, reads:

Dear Supplier,

National Foods has received the proposal sent on 25 November by your collective bargaining group (CBG) and, after careful consideration, has no choice but to reject it.

The new claim from the CBG represents an increase of over $16 million dollars on National Foods’ current offer from 1 January 2010. National Foods does not have the capacity to pass this increase on to our customers, which would place our business at a distinct competitive disadvantage in the marketplace. We owe it to our 500 workers in the state, and our farmers, to maintain a sustainable business into the future.

We understand these are difficult times in Tasmania. With that in mind, National Foods’ offer is still the best in Tasmania. Our minimum price guarantee provides our farmers further protection. The world commodity price is showing some signs of improvement with grain and fertiliser prices well down on the previous year so we remain hopeful we can navigate through this tough time together.

As previously communicated under the contract schedule on offer, National Foods will provide a minimum base price of 33 cents per litre across the year plus around 3.8 cents per litre in contract, quality, volume, and compositional bonuses. This adds up to 36.8 cents per litre. Should there be future price increases by Fonterra in response to world price movements, National Foods will maintain its minimum price premium guarantee against the Fonterra price. In addition, we are offering a $1.1 million assistance package, bringing the total value of the offer to more than 37.5 cents per litre over the year.

Our deadline of 30 November still stands before we open up to the market place, which is not our preference. For those that choose not to sign, National Foods will continue to collect their milk and will continue to pay according to the schedule that was released prior to our current offer for the months of November and December. This schedule, as you know, provided for an annualised base price of 30.78 cents per litre which, including quality, volume, and compositional bonuses, represents approximately 23 cents per litre for the months of November and December.We will review our position for months after December should there be a need for non-contracted milk after this point.

We thank those who have already accepted our offer and for those that haven’t, we urge you to choose whether or not to accept it on the basis of a careful comparison with what National Foods’ competitors are paying.

For more information:
Geoff Lynch
General Manager Corporate Affairs
03 9188 7616
0405 319 819
geoff.lynch@www.lionco.com