Saputo has announced a $6.80 a kilogram milk solids opening milk price for 2019-20 for its southern milk region.
The price is 18.3 per cent higher than its opening price last year of $5.75/kg MS.
The price is 20c/kg MS higher than the two other major processors Fonterra and Bega, but behind Australian Consolidated Milk's $7/kg MS.
The company also announced a step up for season 2018-19, taking the closing price to $6.15/kg MS.
In a letter to suppliers, Saputo president and chief operating office Kai Bockmann said with market conditions continuing to improve in recent months, the opening price reflected its current assessment of expected market conditions for the upcoming year.
"The global market supply and demand fundamentals remain positive with milk production growth easing across key regions and demand remaining firm," he said. "However, we anticipate continued volatility in the global dairy markets."
Mr Bockmann said the closing average price would depend on many external factors.
Simpler pricing system
Saputo has also moved to introduce a single pricing structure and quality standard for all suppliers in the southern milk region.
The company said the five-and-seven system aimed to promote simplicity, transparency and fairness for all suppliers.
A simpler system was flagged by the company last year.
Several processors have moved to simpler systems in response to calls by farmer groups such as the United Dairyfarmers of Victoria.
The simple pricing structure moved away from individual monthly pricing, with two prices covering August to December and January to July, better enabling suppliers to operate their farms, Saputo said.
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Saputo said a new quality standard would enable it to help suppliers to recognise and resolve potential milk production issues faster.
It said this aligned with its commitment to produce "premium products using only the highest quality milk".
The company said the combination of a strong opening price paired with a simple, fair pricing structure and quality standard would help suppliers plan for the year ahead with added certainty and confidence.
The step up takes the 2018-19 season price from $6.05/kg MS.
It will be made in July.
The company said 2018-19 was a transition year in merging the former Warrnambool Cheese and Butter and Murray Goulburn operations.
As such all suppliers would be provided with the best available price by the end of the year, based on the two payment systems.
Some farmers may receive top-up payments in August under this policy.
This story first appeared on Australian Dairyfarmer
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