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Fonterra is again ramping up the price it pays Australian dairy farmers for milk as it fights for farmer loyalty amid the drought that is affecting production across the Tasman.
The rise - for the company's suppliers in Victoria and Tasmania - will be paid next month for
milk supplied from the start of the season.
It follows an increase in December for the same reason.
Fonterra suppliers in Australia are not co-op members as in New Zealand so the company cannot count on shareholder loyalty to help it attract milk.
Last month the price went up A11c/kg of butterfat and A20c/kg of protein.
Yesterday, Fonterra announced a further A7c/kg butterfat and A17c/kg protein for this season, which ends in June.
Fonterra would not say how much the rises would increase total prices per kilogram, partly because it did not want to give market information to competitors and partly because the total would vary from farmer to farmer.
In Australia, due to strong competition between milk processors, individual companies may negotiate different prices with different farmers at the start of each season. Any increases during the season would be made on top of the base price.
Australian industry figures show the national average milk price for last season was A$4.50/kg, compared to Fonterra's payout of $4.10/kg.
Fonterra's general manager of milk supply in Australia, Steve Nelson, said the company recognised a "strong relationship with suppliers" was important, "especially during this dry season".
Nelson said there had been some change in the dry weather patterns and "we hope for a continuation of this trend".
A factor affecting Australian returns was that, while international prices were higher, the Aussie dollar remained strong against the US currency, which is used to trade dairy products internationally.
Fonterra's Australian announcement follows speculation this week that the drought and other factors - which have pushed international prices high - could lead to the company paying more to New Zealand suppliers this season.
The current Fonterra payout forecast here is $4.05/kg of milk solids.
Commentators have suggested this could be pushed out to between $4.15/kg and $4.35/kg by the higher international prices.
However, Fonterra had warned the strength of the kiwi dollar meant it would be "reckless" to create expectations of $4.35/kg. It said the dollar's rise meant the co-op was "running fast to stand still" at $4.05/kg
