Fonterra lifts milk price, pointing to possible rises for Australian farmers

New Zealand dairy giant Fonterra’s milk price hike could lead to higher prices for Australian farmers.

Fonterra supplier dairy farmer Jude Charleston, from Tasmania.

New Zealand dairy giant Fonterra has raised hopes Australian farmers could soon be on the receiving end of a much-needed price hike after a year of tumult for the sector.

In an announcement across the Tasman, the dairy co-op said it would raise the price offered to its farmers by NZ50 cents to $NZ4.75 ($4.56) per kilogram of milk solids.

The number brings it almost in line with the opening milk price of $4.75 in Australia, but more significantly points to the prospect beaten-down Australian farmers could see higher prices of their own before the year is out.

A positive global dairy auction last week significantly heightened expectations the dairy market may have turned a corner, with Fonterra chairman John Wilson confirming today conditions had improved as supply came out of the market.

“Milk production is reducing in most dairying regions globally in response to low milk prices and this is bringing the world’s milk supply and demand back into balance,” he said.

“Milk production in the EU is now in decline and our New Zealand milk collection at this early stage is around 4 per cent lower for the year to date.

“We expect the dairy market to be volatile over the coming months and will continue to keep our forecast updated for our farmers as we move into the season.”

Mr Wilson added current prices were still at “unrealistically low levels” despite the recent uplift.