Fonterra's opposite number in Australia, Murray Goulburn, has announced A$4.31 per kg of milksolids as its opening farmgate milk price forecast for the season ahead, well below the average cost of production across the Tasman.

In a letter to farmer shareholders, the co-operative said its view was that commodity prices would continue to trade at around current levels for the remainder of 2016 with only a modest recovery into 2017.

For the full financial year to June 30, 2017, Murray Goulburn put the farmgate forecast at A$4.80 per kg of milk solids compared with farmer estimates of break-even of around A$5.00/kg to A$5.50/kg.

Murray Goulburn is Australia's biggest dairy co-operative, accounting for about 37 per cent of the country's dairy production, and is the key price milk price setter in its market.


Fonterra, which is the second biggest dairy company across the Tasman, in May cut its milk price for 2015/6 to A$5.00/kg from A$5.60 kg.

The New Zealand co-operative is expected to follow Murray Goulburn's lead in its Australian opening price for 2016/7.

Murray Goulburn also forecast a net profit after tax of A$42 million for 2016/7 compared with a February prediction of A$63 million and a prospectus forecast of A$89 million.

In the aftermath of the first milk price downgrade and earnings downgrade earlier this year, managing director Gary Helou and chief financial officer Brad Hingle resigned.

There have been a string of resignations from the board and investors have also launched a class action against the company.