Fonterra revises down Aussie milk price, offers farmer support loan

Fonterra [NZX: FSF] Australia has revised down its farmgate milk price following Aussie dairy cooperative Murray Goulburn making a similar move last week.

Fonterra announced its revised farmgate milk price in Australia is $A5.00kg/MS, down from $5.60kg/MS.

The cooperative says the price change “better reflects the reality of the supply and demand imbalance affecting global dairy commodity prices, compounded by the recent strength of the Australian dollar.”

Fonterra also announced it is offering its suppliers an interest-bearing support loan of up to 60c per kg/MS, linked to a supply commitment and is repayable from the 2018 financial year.

“Fonterra expects the revised milk price will reduce the cost of goods sold for Fonterra Australia by around $A48 million but this will be subject to a number of factors including final milk volumes for the year.

“This will contribute to the reduction of operating losses in our Australian Ingredients business this financial year,” Fonterra announced to the NZX.

Fonterra’s current earnings guidance range of $NZ0.45–0.55 per share reflects “a range of possible impacts through to the end of the financial year including the completion of announced business sales in Australia.”

“As a result, Fonterra is maintaining its current guidance range and will continue to take a responsible approach.”

The cooperative has already reduced payments to its New Zealand suppliers to $3.90/kgMS for the current season, which is below the cost of production for most. 

Fonterra has previously offered New Zealand farmers an interest-free loan scheme.

Today’s announcement follows Aussie dairy giant Murray Goulburn slashing its milk price to farmers last week.

It revised the expected price to $A4.75 to $A5 for the year to June.

The Aussie milk cooperative said the February forecast farmgate milk price of $A5.60 for farmers in Victoria, South Australia, and southern New South Wales would be no longer achievable.

Goulburn also announced its managing director Gary Helou would step down. 

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