THE milk price war in the south-west has hotted up further with Fonterra yesterday announcing a record early-season farmgate milk price of $6 a kilogram/milk solids.
Fonterra’s record price, which it claimed placed it ahead of its competitors, was achieved through a double step-up increase yesterday of 16 cents a kilogram of butterfat and 40c/kg of protein.
Fonterra Australia managing director Judith Swales said it decided to double its September step-up price rise of 8c/kg butterfat and 20c/kg of protein to help suppliers take advantage of strong demand and increase production.
“We lead the industry in delivering cash on farm when it counts, with no strings attached, and our outlook for this season remains strong,” Ms Swales said.
Fonterra’s price rise came as United Dairy Power, one of the smaller dairy processors operating in the south-west, forecast that dairy farmers were headed towards a “sensational year” for milk prices that could bring them their second-highest returns.
UDP general manager Darryl Cardona said “very high” farmgate prices would be paid this season because dairy commodity prices were already experiencing “double-digit growth,” and the value of the Australian dollar had dropped by more than 10 per cent, boosting exports.
However, Mr Cardona said it was yet to be seen whether the anticipated boom year ahead would enable farmers to recoup the losses of the past financial year. He said the south-west was presently the most competitive area in the state for dairy processors as they sought to increase their milk supply by offering a variety of incentives for farmers to switch processors.
Some processors were offering interest-free loans to farmers to switch while other inducements were being kept confidential, Mr Cardona said.
He said UDP had been less successful than others in gaining more suppliers in the south-west and had been more successful in South Australia.
“The closer farmers are to the factories in the south-west, the more competitive it is,” Mr Cardona said.
South-west processors appear to be trying to get more suppliers along roads where tankers already pick up milk in a bid to gain economies of scale.
On future price rises, Fonterra said dairy commodity prices were expected to remain at historically high levels for the season, encouraging it to lift its forecast for its average closing price range for 2013-2014 to between $6.10-$6.30/kg of milk solids.
The company said individual supplier’s milk prices would vary across Fonterra’s supply regions, depending on the individual farm’s milk profile, pricing options, regional production factors, milk quality and farm management systems.
The buoyant dairy market last week prompted Warrnambool Cheese and Butter to boost its butterfat price by eight cents a kilogram and its protein price by 20c/kg, ahead of a scheduled October price review.