July 20, 2011

Fonterra raises farmgate milk price

Dairy giant Fonterra has announced an increase of US$0.12/kilogramme butterfat and 30c/kg protein in its farmgate milk price just two weeks into the new season.

This is effective beginning with the milk supplied from the start of this month.

This lifted its current season price to US$4.85 a kilogramme of milk solids from an opening of US$4.65/kg of milk solids. At the same time it topped-up last season's price to the tune of 15c/kg butterfat and 38c/kg protein.

Fonterra said the final price increase for last season brought its average farmgate price for 2010-11 to US$5.70/kg of milk solids or "its second-highest closing price ever".

Fonterra Australia milk supply general manager Heather Stacy said this step-up would deliver an extra US$31 million into the pockets of Victorian and Tasmanian suppliers.

The step-up would be back-paid to the beginning of last season and available in next month's milk cheque. "The market is in a position of relative equilibrium which has supported fairly steady whole milk powder prices overall during the past 12 months," she said.

"Generally, we have seen WMP trading between US$3,500 and US$4,000 per tonne which provides a consistent base for us to work from. Globally, milk production is forecast to increase over the coming year but we continue to see strong demand for dairy products, and milk powders across the Middle East, South East Asia and China, so we expect these balanced market conditions to continue," she added.

Fonterra was the first processor to open for the current season. It told suppliers in May to expect a base of US$4.65/kg of milk solids for the new season.

Following this announcement and closer to the new season, other processors opened at higher levels. Fonterra supplier Con Glennen of Noorat described the recent milk price announcements as "very positive for the industry". "I guess where we were two years ago we couldn't expect it to be better," he said.

Announcing an early milk price is a good initiative he said, as it provides a base price for farmers and the industry to work with before the start of the season.