Fonterra Australia has announced its opening average milk price – $5.85 per kilogram of milk solids (kgMS) for the coming season.
That’s 10 cents kg/MS higher than Canadian dairy giant, Saputo.
Read more: Farmers query Saputo opening price
The company has also issued and updated forecast closing average milk price range of $5.85 to $6.20kg/MS for the season.
Fonterra Australia managing director René Dedoncker said the price reflected what the company could earn in the market, as it continued to optimise its assets, strengthen strategic partnerships, improve its product mix, and drive greater returns from domestic and global markets.
“Our opening and upgraded forecast closing range are based on a continued positive global supply and demand outlook, coupled with more favourable currency movements,” Mr Dedoncker said.
Read more: Brighter outlook for dairy
“Demand is expected to remain strong – especially from China for milk powders and Japan for cheese, as well as butter and AMF globally – and the global dairy market’s current strong prices are expected to continue throughout the new season.
“Since our last price review, we have achieved positive sales in key cheese export markets, GDT remains at supportive levels, and the short-term weakness in the Australian dollar has given us confidence to update our forecast closing range.
Mr Dedoncker said the price was market based and sustainable.
“It’s another step towards pricing simplicity – which is what the industry is calling for.
“In line with our commitment to give farmers earlier pricing signals to assist them in planning ahead, we again provided a forecast closing range in May, we have continued to offer Fixed Base Milk Price, and we provide regular market information in our Global Dairy Update Australia,” Mr Dedoncker said.
Yes. Processors need to do their part in increasing confidence at the farm gate so they have enough milk supply for optimal plant utilisation and efficiency.— Marian Macdonald (@milkmaidmarian) June 20, 2018
Fonterra also advised suppliers that it was increasing its farmgate milk price for the 2017/18 season to $5.68kgMS, plus $0.40kgMS, for a total cash payout and forecast average closing milk price of $6.08/kgMS.
The increase will apply from July 1, 2017 and will be paid on July 15, 2018.
“Our business is in good shape as we continue to strengthen our long-term relationships with strategic customers, implement a number of capacity and efficiency improvements across our network, including our state-of-the-art Stanhope cheese plant, and we’ve launched Farm Source, which is changing the way we work with our farmers and provides benefits beyond the milk price.
“We are confident in the long-term fundamentals of Australian dairy and remain committed to continuing to pay our farmers a sustainable farmgate milk price that is reflective of the market,” Mr Dedoncker said.
Fonterra farmers generally welcomed the opening price.
Noorat’s Con Glennan said Fonterra appeared to be offering a better price, than Saputo.
“I think Saputo is very underwhelming, for a bloke who wants to get his milk supply back,” Mr Glennan said.
Mr Glennan, who milks 400 Jerseys, said Fonterra was paying a competitive price.
“It’s always going to make a difference and they have started on the front foot,” he said.
Fonterra still had a way to go, to build trust with farmers, after the milk price crisis.
“We don’t have many options,” Mr Glennan said.
‘There are some boutique blokes doing a little better, but the milk cheque you get is better than the one that never arrives.”
Chris Griffin, who milks 400 cows north of Moe, said Fonterra was paying as good a price as it possibly could, under the circumstances.
“It’s not what they open at, it’s where they finish that’s the important thing,” Mr Griffin said.
“The dollar is behaving itself, fairly well, and that’s assisting the export market.”
He said he believed Fonterra was doing its best to gain markets, which would return more money to farmers.
‘If they can’t achieve returns from the world market, we can’t get paid.
“But these things don’t happen overnight.”
Rain would help the business more than price.
“We can get by easily, on that price, if we were guaranteed a season.
“The last one has been horrendous, it’s been damned tough.”
Grain prices were high and hay was hard to get, so Mr Griffin said he had dried off his herd, early.
Anthony Hill, Middle Tarwin, said the opening price was positive.
“I’m pretty happy with it, as long as when the step-ups are there, they give them,” Mr Hill said.
The increase in global prices, and the drop in the dollar, had meant the sector was on the way up.
‘Who would have thought, at Christmas time, we would were going to get $5.85?
“It’s a good starting point.”