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Bega Cheese has forecasted lower earnings for the 2023 financial year compared to the previous financial year.

In a trading update issued Wednesday evening,the company said it had anticipated farmgate milk prices to rise between 15-20 per cent,depending on global dairy commodity markets.

“However ... there has been particularly strong competition amongst milk processors during June and July,” the trading update stated. Farmgate prices in Victoria have turned out to be to 30 per cent higher than 2022 levels.

These price rises have been passed onto retailers and felt by consumers,the company acknowledged.

“The farm gate price increase will benefit farmer suppliers,impact all Australian dairy companies,and is already being reflected in higher product prices in the retail and food service market,” it said.

“Bega Cheese expects that the company’s[2023 financial year] performance will be impacted by the delay in timing of some of these higher product prices and the finalisation of secured milk volumes in July.”

Investment firm Bell Potter,which has a ‘hold’ recommendation on Bega,reduced its long-term target price on the stock from $4.20 to $3.80 due to the “ongoing dislocation in farmgate pricing and ingredient pricing”.

“There has been further upward inflation in farmgate milk prices,” wrote analyst Jonathan Snape in a note following Bega’s trade update.

“Given the substantial escalation in recent months,we have also moved to incorporate further pricing gains in the branded portfolio (reflective of cost pressures that retailers are likely to face in direct supply).”

The ASX-listed company’s trading update comes as supermarket giantColes and Woolworths both confirmed they were increasing retail prices for milk by as much as 60 cents after having to pay more to farmers.

“Across the dairy cabinet,brands have already increased their retail prices to reflect higher wholesale costs across the entire industry,” said a Woolworths spokesperson. “We’ll be adjusting the price of our own Woolworths brand milk in the coming days to reflect these higher costs as well.”

In afternoon trading,Bega shares were 9 per cent lower at $3.24,their lowest level since 2013.

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