Fonterra farm gate milk price expected to plummet as northern hemisphere dairy production rises

Australian dairy farmers are likely to be paid more than those in New Zealand, if price forecasts by Fonterra Co-operative Group are any guide.

Australian dairy farmers look like getting paid more than their counterparts in New Zealand.

AUSTRALIA’S three biggest milk processors are keeping mum over opening prices, despite a Monday deadline to reveal all.

The new dairy code of conduct compels processors to stipulate their 2020-21 season opening price by June 1, although Bulla is already out of the starting gates.

Bega, Fonterra and Saputo are yet to outline a figure although United Dairyfarmers of Victoria president Paul Mumford has called for a price of at least $7 per kilogram milk solids.

Bulla kicked off the annual price war on Monday by announcing opening prices of $6.30-$6.70/kg MS for its suppliers.

Fonterra farm source director Matt Watt said the coronavirus pandemic had caused great uncertainty in market forecasts, with Fonterra’s New Zealand forecast milk price range of NZ$5.40-$6.90 for reflective of the softer outlook.

“We’ve told our farmers that we’ll be out with our opening price announcement by June 1,” Mr Watt said. “This price will be based on what we can earn through our product mix, customers and markets.”

Saputo communications manager Debbie Jones also did not outline an opening price, only to say the processor “will be advising suppliers of our 2020-21 minimum milk prices on or before June 1”.

Bega management was contacted by The Weekly Times but did not respond before deadline.

Fonterra foreshadowed the unusually high milk price range in NZ when releasing its third quarter financial report released last week.

“The wider range reflects the increased uncertainty we face in the coming season,” Fonterra chairman John Monaghan said.

“It is not clear what impact government interventions in the European Union and US will have on curbing their milk supply, however, we expect our competitors there to put more of their milk into the product types that determine our milk price as they chase government support programs and favour longer-life products.”

Mr Mumford said higher Australian prices were not surprising as Fonterra ran a different business profile in Australia than in New Zealand.

“New Zealand is really a peak milk flow dairy system, where they produce so much milk at the height of spring and convert most of it into powder to sell later,” he said.

“Our milk flow is a whole lot flatter and 60 per cent of our product mix is sold within Australia’s boundary.

“So you can’t draw a straight line between New Zealand prices and here.”