FONTERRA Australia yesterday told suppliers to expect an average payment of $4.70 to $5.00 per kilogram of milk solids for this season.
Letters were sent to suppliers detailing the opening prices they will be receiving.
General manager of milk supply Heather Stacy said opening payments varied from farm to farm but would range from about $4.30 to $4.60 per kilogram.
Milk composition and the farm’s supply profile were the determining factors, she said.
“We also have five payment options, so the price varies from supplier to supplier,” she said.
“Our pricing system takes into account a number of regional variations in production, on-farm conditions and farm management systems.
“Given each farm has a different milk profile, the number for all suppliers to remain focused on is our anticipated closing price range.”
The opening price puts Fonterra roughly on a footing with Murray Goulburn and Warrnambool Cheese and Butter, which both opened at $4.50 per kilogram, and Bega Cheese at $4.48 per kilogram. United Dairy Power opened between $4.88 and $5.19 per kilogram.
“We believe it’s misleading to quote a single figure because there is so much variation,” Ms Stacy said.
Yesterday’s full-season projection was higher than Fonterra anticipated in its price guidance given to suppliers in May.
While the high Australian dollar continues to constrain prices paid to farmers, the downturn in recent months has been caused by an excess of product from key dairy export countries due to outstanding seasonal conditions.
Recovery depends on depletion of the global commodity stockpile. There have been recent signs of this occurring, with positive results in Fonterra’s fortnightly globalDairyTrade auctions during June.
However, the latest auction on Tuesday evening lost ground.
“Last night’s globalDairyTrade event is a reminder of the market sentiment that has prevailed since January. We still hold the view that the global supply/demand balance will recover into calendar year 2013, and this anticipated recovery has been built into this price guidance,” Ms Stacy said.
Fonterra will confirm its closing price for the 2011/12 season later this month.