Murray Goulburn, Australia's biggest dairy co-operative, has confirmed a full-year forecast farmgate price of A$6 per kg of milk solids.

Victoria-based Murray Goulburn (MG), with annual revenue of about A$2.9 billion ($3 billion), is Australia's biggest dairy co-operative but is a mere minnow compared with Fonterra, whose revenue last year came to $22.3 billion.

The co-op is responsible for about 37 per cent of Australia's dairy volume, compared with Fonterra at close to 90 per cent of New Zealand's volume. Fonterra last week said it was sticking with its $4.70 per kg farmgate milk price forecast for 2014/15.

MG said a final price of A$6 per kg milk solids would be its third highest farmgate price on record and would be delivered despite a significant drop in global dairy commodity prices mid-way through last year.

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"Key dairy ingredients prices globally have fallen significantly in the past six months, dragging down farmgate prices in dairy exporting countries by up to 40 per cent," said managing director Gary Helou.

MG's forecast farmgate price is 12 per cent lower than the 2013/14 record closing price of A$6.81.

In the six months, MG had mitigated the impact of global price movements with cost reductions and product mix optimisation.

International sales have benefited from MG's strategic shift towards higher value finished goods such as nutritionals and the continued growth in international dairy foods, he said.

Domestic sales increased materially compared to the prior corresponding period as a result of initiatives such as MG's entry into the daily chilled milk market via the 10-year agreement to supply Coles supermarkets private label milk in Victoria and New South Wales as well as growth in the Devondale range of dairy foods products.

MG reported a half-year net profit after tax of A$12.9 million compared with A$61 million in the previous corresponding period.

The two periods are not directly comparable because of a higher input milk price paid at the beginning of the financial year, it said.

The co-operative said it was on track to deliver a full-year net profit after tax of A$20 million to A$30 million, broadly in line with last year's result. Fonterra is set to report its first-half result on March 25.

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MG is proposing a new capital structure, similar to the NZX-listed Fonterra Shareholders Fund. It will be put to shareholders next month with a view to a listing on the ASX around mid-June.

Murray Goulburn
*Farmer co-operative
*Responsible for about 37 per cent of Australia's dairy volume
*Full-year forecast farmgate price of A$6/kg of milk solids
*Would be its third highest farmgate price on record.