Fonterra Australia has lifted its farmgate milk price to $5.98 a kilogram milk solids (kgms) as competition for milk supply in the region intensifies.
The price, an increase of 13c kgms, beats that of Saputo Australia, that last month lifted its farmgate milk price to $5.95 kgms.
But Fonterra has brought down its forecast closing milk price from $6.20 kgms to $6.10 kgms for the 2018-2019 milk season.
Fonterra Australia managing director René Dedoncker said the increase will help support its farmers who were facing challenging drought conditions.
“Rising costs for feed and water due to the drought means that cash flow is even more critical for our farmers,” Mr Dedoncker said.
“Receiving this increase in their milk payment now, rather than later in the season, will help our farmers make important decisions on input costs and plan for the remainder of the year.
“This milk price is reinforced by our strong Australian business which is performing well and generating repeatable returns, and is supported by tightening domestic supply of milk and the weakening Australian dollar.”
But he also said market conditions were putting downward pressure on the upper end of the forecast range announced in May.
Rising costs for feed and water due to the drought means cashflow more critical for our farmers.
- René Dedoncker, Fonterra
“A weaker currency has only partially offset the impact of an increase in production this season in some other dairy-producing countries. As a result, we have revised our forecast closing average milk price range to $5.98 to $6.10kgms, down from $6.20kgMS.
“While it’s disappointing to have a reduction in the forecast closing price range, it’s important that we provide our farmers with clear, early signals on how the market is likely to impact the farmgate milk price,” Mr Dedoncker said.
Across the ditch, Fonterra New Zealand has trimmed its milk price forecast and increased its expected milk collection volumes from 1525 million kgMS to 1,550 million kgMS in response to strong early season production. Fonterra NZ’s milk price is expected to be from $6.25 and $6.50/kgMS.