Step-up now but less later

By Dairy News

FONTERRA AUSTRALIA has announced a step-up of 13¢/kg milk solids but revised its forecast closing end-of-season price from $6.20/kg MS to $6.10/kg MS.

The company said the price step-up took its average farm gate milk price to $5.98/kg MS.

Fonterra Australia managing director René Dedoncker said rising costs for feed and water due to the drought meant cash flow was even more critical for the company’s suppliers.

“Receiving this increase in their milk payment now, rather than later in the season, will help our farmers make important decisions on input costs and plan for the remainder of the year,” Mr Dedoncker said.

“This milk price is reinforced by our strong Australian business, which is performing well and generating repeatable returns, and is supported by tightening domestic supply of milk and the weakening Australian dollar.”

Mr Dedoncker said market conditions were putting downward pressure on the upper end of the forecast range announced in May.

“A weaker currency has only partially offset the impact of an increase in production this season in some other dairy-producing countries,” he said.

“As a result, we have revised our forecast closing average milk price range to $5.98 to $6.10/kg MS, down from $6.20/kg MS.

“While it is disappointing to have a reduction in the forecast closing price range, it’s important that we provide our farmers with clear, early signals on how the market is likely to impact the farm gate milk price.

“We continue to monitor currency and global dairy prices closely and will keep our farmers updated throughout the season with the latest market conditions.”