Fonterra sets Aust milk price higher than MG

Australian dairy farmers are being offered a better deal from Fonterra than its Australian rival, Murray Goulburn File photo / NZ Herald

Fonterra has pitched its opening Australian milk price for the 2016/7 season at A$4.75 a kg of milk solids, rising to an average A$5.00 a kg for the entire season.

The milk price compares with that of Fonterra's opposite number in Australia, Murray Goulburn, which this week announced a A$4.31 per kg/milksolids opening milk price for the season, rising to A$4.80 per kg for the year.

The estimated average breakeven point in Australia has been put at A$5.00 to A$5.50/kg.

Fonterra's chief operating officer of velocity and innovation, Judith Swales, said A$4.75 was a "responsible" opening price that reflected current market conditions.

"Our forecast is based on the Australian dollar holding at around 74 cents to the US dollar and reflects the revenue we expect to earn on products produced using our manufacturing assets," Swales said in a statement.

"Our farmgate milk price in Australia is also impacted by global dairy markets given our mix of domestic and export sales," she said.

Swales said that there was still an imbalance between global milk supply and demand, but that there were signs in key milk producing areas of a slowdown in production and increased imports into key markets such as China, Asia and Latin America.

"This supports our view of a recovery in global prices as we move through the season," she said.

Another big player across the Tasman, Bega Cheese, last week said it would it would pay A$5.00/kg across its supply regions.