A2 Milk's provider Synlait sets opening milk price at $7.00/kg

Synlait Milk chief executive Leon Clement. Photo/NZ Herald.

A2 Milk's key provider, Synlait Milk, has set its opening base milk price for the upcoming season at $7.00 kg of milk solids.

Synlait also announced its forecast base milk price for the 2018/2019 season had increased from $6.25 kgMS to $6.40 kg.

"The increase to $6.40 kgMS for this season is due to recovering dairy commodity prices since our last update in January 2019," Synlait chief executive Leon Clement said.

"We've seen steady improvements in prices since the start of December, recovering a lot of the ground lost earlier in the season," he said in a statement.

Synlait is positive about pricing for the 2019/20 season but said the forecast relied on pricing remaining robust throughout the season.

"We think that's realistic in the light of the current slowdown in world supply and strong demand from our key markets," Clement said.

Synlait's final milk price for the 2018/9 season will be confirmed alongside the annual result announcement in early September 2019.

The forecast for the 2019/2020 season will also be updated at that time.

Dunsandel-based Synlait's announcement follows Fonterra's move last week to set its forecast 2019/20 farmgate milk price range will be $6.25-$7.25 per kg.

Fonterra has also narrowed its 2018/19 forecast Farmgate Milk Price range from $6.30 - $6.60 per kgMS range by 20 cents to $6.30 - $6.40per kgMS.

Earlier this month, Synlait's expansion plans at Pokeno struck a snag when the company received a cease and desist letter in relation to the ongoing court proceedings regarding its Pokeno land.

In February 2018 Synlait announced the conditional purchase of 28 hectares of land in Pokeno to establish its second nutritional powder manufacturing site.

On May 9 the Court of Appeal overturned a previous High Court decision to remove historic covenants which, if left in place, may hinder Synlait's intention to develop the site.

Synlait said then it believed a practical solution was attainable, but the company's share price has suffered in response.

The stock last traded on the NZX at $9.16, down from $10.75 at the start of this month.

A2 milk, which sources most of its product from Synlait, has a 17.4 per cent stake in the company.