Fonterra Australia has stepped up its price for Australian suppliers while its milk collection in Australia continues to fall.
The step up on November 29 is the first since a new agreement that no longer guarantees a benchmark price for Fonterra's Australian suppliers was signed with its farmer supplier representative group in August.
The step up of 5 cents per kilogram of butterfat and 10c/kg protein takes its average farmgate milk price to $6.95/kg of milk solids.
The company announced an opening price of $6.60/kg MS in May and stepped up in June to $6.80/kg MS to match other company's opening prices.
The latest step up brings its pricing into line with Saputo, which lifted its price in October.
The Australian supplier representative group was restructured in November.
The restructure saw the last vestiges of the Bonlac Co-operative, which Fonterra took over in 2003, removed with the Bonlac Supply Company voting at its annual general meeting in November to merge BSC with Fonterra's Supplier Forum to form a new Fonterra Australia Suppliers' Council.
The BSC chair John Dalton became the chair of the new suppliers' council.
Mr Dalton said the previous milk supply agency agreement, which had contained the benchmark price clause, had been due to finish this month but a new agreement was signed in August.
"We have been working on that for a couple of years for a suitable replacement between us and Fonterra," he said. The suppliers council was now using a consultant, Fresh Agenda, to independently validate the price.
"When we looked for a suitable alternative to ensure we are being treated and getting a fair price, we have settled on what we call external validation," Mr Dalton said.
Fresh Agenda provided a report looking at Australian and international milk markets and milk trends to allow the council to check the price being offered by Fonterra.
Mr Dalton said the newly-merged council would give farmers a closer working relationship with Fonterra that would help rebuild trust.
"It will take time for trust to return," he said.
The new council will have a stronger regional structure.
There will be four regional councillors in each of the four regions (western, northern and eastern Victoria and Tasmania).
Mr Dalton said farmers would notice a more regional focus, which would give them greater access to their four representatives.
These representatives would link more closely with Fonterra's Farm Source team to identify problems earlier and to get a faster resolution.