[See related story: Fonterra revises opening price from $6.06 to $6.40]

Fonterra Australia has announced its weighted average farmgate milk price for the 2020/2021 season of $6.06 per kgMS, with an estimated closing price range of $6.30 to $6.70 per kgMS.

By comparison, Bulla Dairy Foods of Colac set their opening price last week at between $6.30 and $6.70.

Saputo came out later on Monday with a weighted average milk price will be $6.40 per kilogram milk solids.

The others, including Burra Foods, are yet to announce although under the new Code, they have to announce today.

The minimum price from Fonterra, along with the Milk Supply Agreements, are available to farmers on Fonterra’s dedicated website at www.farmsource.com.au/pricing.

Fonterra Australia Managing Director René Dedoncker says that Fonterra’s prices have considered all factors including the uncertain market conditions caused by COVID-19.

“Global commodity prices have softened and are back to early 2019 levels with GDT average prices between $2,800 and $3,000 USD a tonne. After considerable volatility, the Australian dollar has stabilised between US$0.64 and US$0.66 and we have based our pricing on this range.

“The impact of COVID-19 on economies and the market is still largely unknown and we are seeing softening of demand relative to supply which is putting downward pressure on prices.

“We anticipate that global dairy markets will be uncertain for some time. The global downturn is continuing to reduce consumers’ purchasing power while the foodservice industry remains impacted by restrictions in the tourism and the hospitality sectors.

“The last month has given some cause for optimism in the year ahead, with improvements in key product values. By the end of June, we’ll have more certainty on our next six-monthly product pricing, including key cheese export contracts. We will provide our farmers with an update on this by the end of June, including any resulting impact on our price forecast.

“Fonterra’s market-leading consumer brands and value-added ingredients portfolio are providing strong options to put milk into. Like our suppliers, we will be head down, doing the basics well and focusing on costs to secure the best margins,” says Mr Dedoncker.

To meet the obligations set out in the Code, Fonterra, in common with the industry, needs to announce our minimum price by June 1, including the reasoning behind it. Fonterra also needs farmers to enter into a written supply agreement by July 1 to ensure their milk is collected.

Under the Code, all agreements to supply must include a minimum price.

The Code defines ‘minimum price’ as the lowest price payable under the agreement for milk supplied during the period. It can be presented as $ per kg/MS or litres or as a rates table.

Saputo opens up

Saputo Dairy Australia (SDA) is pleased to announce to suppliers in the Southern Milk Region that its 2020/21 opening weighted average milk price will be $6.40 per kilogram milk solids.

In accordance with the Dairy Industry Code of Conduct, which commenced on 1 January 2020, SDA has published its opening minimum milk prices in its standard non-exclusive Milk Supply Agreement (MSA) for the Southern Milk Region. The minimum prices are the price SDA will pay monthly to suppliers for premium quality milk.

In addition to the minimum prices in our MSA, SDA will continue additional payments to suppliers, including the monthly milk quality bonus, productivity payment and off-peak payment. Together, the minimum prices and additional payments result in the weighted average farm gate milk price.

SDA’s standard MSA and pricing model promotes simplicity, transparency and fairness for all suppliers to help them plan for the year ahead with certainty and confidence.

While the Code allows prospective step-downs in limited circumstances, SDA has again committed to no price step-downs in any circumstances during the year, which honours our ongoing promise to suppliers.

Determining the outlook for milk prices for the 2020/21 milk year has been particularly challenging. Heightened uncertainty and rapidly-changing conditions arising from COVID–19 will continue to impact world economies and the dairy market for the coming milk year.

Despite this, SDA’s objectives remain the same. We are well placed, with our diverse product mix and markets, to adjust to evolving market conditions and continue maximising the value of every litre of milk.

In other news, Woolworths announced today it will extend its existing dairy contribution payments on two and three litre fresh own brand milk varieties until June 2021.

The 10 cent per litre levy has contributed around $50m to dairy farmers since Woolworths first introduced the initiative in 2018. Based on current volumes, these support payments are expected to contribute an extra $30m to dairy farmers over the next 12 months.

“The move to extend the support will provide certainty to more than 450 dairy farmers supplying milk used in the production of Woolworths branded milk as the Federal Government’s Mandatory Code of Conduct comes into full effect and drives change in the industry,” said a Woolworths spokesperson.

Woolworths will also establish a $5m fund to provide infrastructure and technology grants to dairy farmers to help improve on-farm efficiency and profitability over the next three years. Woolworths is engaging with dairy industry stakeholders on the design of the program and expects to open for applications later this year.