FONTERRA Australia has announced a step-up of 10 cents per kgMS, taking its 2021/22 average price to $7.40/kgMS, and an opening weighted average farmgate milk price of $8.25/kgMS for the 2022/23 season.

Fonterra Australia managing director René Dedoncker said the latest price increase demonstrated another year of consistent performance for Fonterra’s business.

“We continue to deliver, despite the challenges of lower milk production and supply chain disruption, and we made a commitment to increase the price paid to farmers where our business can support it.

“It gives us good momentum as we head into the new season, where we’re opening at an average farmgate milk price of $8.25/kgMS.

“Like last year, we’ve come out early with an opening price in May to help farmers plan for the year ahead and budget in the face of rising costs, and we will review our price in June once key contracts, including cheese exports, are finalised.”

Mr Dedoncker said while Fonterra’s business was well-placed to continue to deliver good returns, recent falls in commodity prices and currency volatility had been factored in when setting next season’s price.

“China’s COVID-19 lockdown, the Russia-Ukraine conflict and continued global supply chain disruption combined with inflation have had short-term impacts on dairy demand. This has flowed through to commodities on Global Dairy Trade with prices down 13.4 per cent over the last four auctions.

“The Australian dollar has buffered this drop in commodity prices, falling to 69 US cents, but has traded as high as 76 cents in April.

“While the outlook for dairy remains positive and we expect global demand to recover next season as these short-term impacts are resolved, inflationary pressures, rising interest rates, increased volatility, and COVID-19 and geopolitical disruptions will continue to be watch-outs,” said Mr Dedoncker.

Fonterra Australia Suppliers’ Council chair Alan Davenport welcomed the announcement.

“Fonterra has shown it can earn and will pay a competitive milk price, and this early, strong opening sets us up well for the season and allows farmers to plan and manage current high input costs,” he said.