UPDATED, Tuesday, 11.30am:
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Fonterra Australia has released an opening milk price of $8.00/kgMS for the 2024/25 season, in line with industry expectations.
In a letter to suppliers Fonterra oceania managing director René Dedoncker said the price was made up of the minimum monthly rates set out in its milk supply agreements, together with standard production and quality incentives.
"This price supports the scenario planning we have been undertaking with our Australian farmers since November to prepare for a milk price that reflects the shift in market conditions," he said.
"In recent years, our industry has seen higher commodity prices, stronger consumer demand and a shortage of milk to meet this demand.
"However, heading into FY25, the global market for cheese, which is a strong contributor to our prices, has declined since the start of FY23."
Mr Dedoncker said cost of living pressures had led to softer domestic consumer demand and higher volumes of lower cost dairy imports.
"This, together with increased milk production in all dairy regions, has contributed to excess cheese inventory in the Australian market driving pricing down further," he said.
"We believe an $8.00/kgMS milk price reflects these dynamics, which we will continue to monitor closely as we move through the season.
"I also want to assure you that Fonterra Co-operative Group's announcement that it is exploring divestment options for Fonterra in Australia has no impact on our business and we will continue to operate as usual.
"We are well placed to manage through the dynamic market conditions and remain a secure home for your milk.
"We have a strong business with choice in which markets and channels we serve, as well as the products we make.
"If a divestment was to go ahead, we intend to include all existing milk supply contracts in place at the time of sale.
"These contracts are vital to our business, and any purchaser of the business would be obliged to comply with the terms of agreements until expiry of the term of the agreement."
The managing director said Fonterra was committed to paying a competitive milk price throughout the season.
"And as part of our bi-monthly review process, we will continually assess market conditions and pass on price increases when they are supported by the market and our business performance," Mr Dedoncker said.
"We appreciate that any change in milk price impacts your farm margins, and your area manager will be in touch to help with an income estimate and to assist you in making the best choice for your business on the different available rates.
"Our supplier meetings will be held in June, when we will be out in our dairy regions to share more about the market environment and how we can support your business.
"I hope to see you there, and that you choose to partner with Fonterra again this coming season."
On Tuesday, June 4, at 10am:
Bulla has announced its opening price for the 2024/25 milk season of between $7.85 to $8.65 $ per kg milk solids.
Bulla Dairy Foods chief executive officer Allan Hood said the planning process for each season took into account the company's own performance and that of the external market.
"This year has seen an unprecedented level of rising input costs, shifts in consumer behaviour and increased competition from imported dairy," he said.
"As we shared with our farmers recently, these pressures indicated that the milk price for this season would be lower than where it has been over the past year."
Mr Hood said the company recognised that any reduction in milk price would have an impact on supplier and "that we are not alone in this challenge".
"However, we will work hard to address this through portfolio innovation and continuous improvement," he said.
"We will continue to partner with our valued farmers to build a sustainable family business for Bulla, for our farmers and the local industry as a whole well into the future.
"We remain committed to being competitive at farmgate and, at every step of this process, we keep our important relationships with our farmers at the forefront of considerations."
Bulla's opening price is well down on last year's opening offering which was $8.80 to $9.60/kg MS.
Bega Cheese has also announced a price range of $7.90 to $8.20/kg MS.
It's been reported Fonterra Australia has announced a 15-per-cent cut to its farm gate milk price, with an opening offering of $8 a kilogram for milk solids, or 60 cents a litre.
Fonterra Australia managing director Rene Dedonker said the price cut to suppliers for the year ahead was a responsible number.
He said while the domestic business continued to perform well, products his company was selling into the global markets faced enormous challenges.
Recently The Standard reported Fonterra was jumping jumps towards 'divesting' in Australia and it's future here was uncertain.
Last Friday, May 31: Saputo Dairy Australia has announced to suppliers its opening weighted average milk price of $8.00 to $8.15 per kilogram of milk solids for exclusive supply in the 2024-25 season.
That's well down on a price of about $9.50 for the previous 12 months, but probably a fraction above doomsday predictions.
South-west dairy insider and former Warrnambool Cheese and Butter factory chief John McLean said the opening price would be a cause of concern.
He said there were certainly hopes the opening price was higher.
"It's in line with the predictions, but that won't be much consolation for farmers," he said.
"With high feed costs and a range of other rising expenses, dairy farming is no different to many other businesses.
"We are seeing companies going bust every day in the media, with the high cost of insurance, fuel and power."
SDA's milk prices for exclusive supply are available to suppliers in the south-west, northern region, South Australia, Gippsland and Tasmania.
"Our opening milk price factors in ongoing global market volatility due to subdued demand, as well as greater variability in domestic markets and anticipated market returns," SDA's director of milk supply and planning Kate Ryan said.
"As we see more market certainty, we would expect to review our prices during the year.
"SDA's strong business position supports us paying a premium above current commodity price returns. This is due to business efficiencies achieved over recent years, including network optimisation initiatives taken to strengthen our competitiveness, reduce costs and ensure higher utilisation through our facilities.
"As part of SDA's long-term commitment to the Australian dairy sector, we continue to support our farmers' growth and business success with a range of ongoing specialised services and programs, while also investing in our operations, in the industry and in our regional communities."
The milk prices quoted above are a weighted average across SDA's supply base.
Milk prices achieved at an individual farm level will vary based on specific milk supply circumstances.
