The company yesterday posted an increase of 16 cents per kilogram of butterfat and 40 cents per kilogram of protein for Victorian and Tasmanian suppliers, the second step-up for the season.

It brings Fonterra’s average farmgate price to $6.36 per kilogram of milk solids.

The company has also raised its end-of-year forecast to an average closing price in range of $6.60 to $6.80 per kilogram milk solids, the most optimistic projection from a major processor.

 Warrnambool Cheese and Butter, which stepped up to $6.40 per kilogram milk solids last week, has forecast a closing price “likely to exceed $6.50”.

Bruce Donnison, Fonterra Australia’s director of ingredients and operations, told The Standard dairy commodity prices were stabilising at a high price level, reflected in this week’s GlobalDairyTrade auction which saw commodities average just over $US5000 per tonne, continuing a long run around this level.

Mr Donnison said strong global demand for dairy products had pulled down stockpiles, a factor which should help maintain prices across the next 12 months.

“There may be some effect from the European and US product coming on to the market with the northern hemisphere peak, but the indications are that demand will largely outweigh their effect,” Mr Donnison said.

“The lower dollar is also helping to improve our returns.”

Fonterra exports about half of its product as raw ingredients, but has increased its focus on high-value nutritional products, he said.

“Fonterra Australia has optimised its product mix to ensure its products command a premium from the market,” Mr Donnison said.

shynes@fairfaxmedia.com.au