Fonterra drops farmgate price

FONTERRA Australia has revised its farmgate milk price, following a similar move by Murray Goulburn.

The full 2015-16 season price will be reduced from $5.60 per kilogram of milk solids to $5/kg MS.

The company also announced the Fonterra Australia Support Loan, which offers a loan of up to 60 cents per kilogram MS that is repayable from 2018. This provides suppliers with options to help deal with the current challenging conditions, and gives them the ability to receive an equivalent of $5.60/kg MS for the current season.

Fonterra Oceania managing director Judith Swales said the price change reflected the reality of the supply and demand imbalance that is affecting global dairy commodity prices.

“The reduction in the farmgate milk price is the last thing farmers want to hear however, it is unlikely to come as a surprise.

“With around 40 per cent of Australia’s milk exported, our message has been that Australia is not immune to the global dairy challenges, that the milk price did not reflect current reality and that farmers need to budget conservatively.

“Fonterra is committed to taking a leadership position to drive towards more transparency on milk price so that farmers have a clear line of sight to budget, plan and respond.”

Fonterra has continued to meet its commitments and honour the agreement with its suppliers through the Bonlac Supply Company milk supply agreement.

BSC chairman Tony Marwood said while the price reduction would be tough for Fonterra’s suppliers, Fonterra had acted responsibly.

“We know that Fonterra has done all it can to send the right price signals and keep suppliers informed,” he said.

“Fonterra will continue to meet the minimum benchmark milk price, as per the BSC agreement. “From next season this will be exclusive of the deductions that Murray Goulburn is using to recover repayments from its farmer support package.

“This is especially important as it is likely a low milk price environment will continue next season and gives farmers greater clarity of a market milk price.”