Fonterra has increased its average farmgate milk price to suppliers to $5.20 a kilogram of milk solids in a further sign the dairy industry is recovering from its big slump last year.
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This brings Fonterra’s farmgate milk price to its forecast closing price for the 2016/17 season.
The two per cent increase from $5.10/kg milk solids (kgms) brings Fonterra’s farmgate milk price to its forecast closing price for the 2016/17 season.
The $5.20 closing price is a 10 per cent increase on Fonterra’s $4.75 opening price for the 2016-2017 season last July.
Fonterra Australia managing director René Dedoncker said the price increase reflected improvement in the global commodity markets and progress on key initiatives for the Australian business.
“Production has fallen across the major exporting regions, particularly Europe and New Zealand, and we’ve seen a significant decline in Australian milk supply,” Mr Dedoncker said.
“This has helped to rebalance global supply, while demand has remained firm.
“As a result there has been a steady improvement in global dairy commodity prices and this is reflected in our farmgate price.
“Our strategy continues to progress, helping us to rebalance our product mix into products generating those higher returns, which we’re able to deliver back to farmers at the farmgate,” Mr Dedoncker said.
He said during the past six months, Fonterra had achieved a number of key initiatives including strong growth for its ingredients business, with almost 1000 containers of cheese, whey and nutritionals exported to key global customers across December and January.
Other positive moves were the progress in work to expand its Cobden coolroom and the construction of a multi-million dollar cheese plant at Stanhope in north central Victoria, Mr Dedoncker said.
Fonterra’s joint venture with Chinese firm Beingmate at Darnum in Gippsland was also operating with the first nutritional powders made under the joint venture now destined for China.
“The progress we’ve made on our strategy, coupled with improvements in the global dairy market, has enabled us to deliver this step up to our farmers,” Mr Dedoncker said.
Fonterra said individual suppliers’ milk prices would vary across Fonterra’s supply regions, depending on the individual farm’s milk profile, regional production factors, milk quality and farm management systems.
Warrnambool Cheese and Butter stepped up its milk price in September to $5/kgms.
Murray Goulburn’s (MG) full year forecast for the price it will pay its suppliers is an estimated $4.95/kgms.
MG, which has previously set the industry’s benchmark milk price, last announced price step ups on October 27 when it lifted its price to $4.86/kgms.
