Fonterra Australia to pay more in 2017/18 season with improving business, milk price

Fonterra Cooperative Group says an improvement in its Australian business and rising milk prices mean it will be able to pay its suppliers more in the season that kicks off in six weeks.

Fonterra Australia expects to pay its Australian suppliers a range of A$5.30-to-A$5.70 per kilogram of milk solids in the 2017/18 season as well as an additional payment of 40 Australian cents/kgMS. It paid  A$5.20/kgMS in the season that is just ending. 

Managing director Rene Dedoncker said the forecast for the season is underpinned by the fact that the Australian business is in a stronger position, with the range based on current exchange rates and commodity market conditions. 

"We've invested in world-class assets, improved our product mix, and exited non-strategic businesses. This coupled with the rebalancing of global supply gives us the ability to pay a competitive milk price to our farmers," said Dedoncker. 

The additional 40 Australian cents came after Murray Goulburn's recent announcements including a decision to forgive its milk supply support package, Fonterra said. The package was introduced last year after Murray Goulburn cut the price for its suppliers. Under the system, the payments were higher than the reduced price but farmers had to repay the money from future milk payments. 

Earlier this month Murray Goulburn announced all future payments of the package which were to recommence from July 2017 will cease and it will also make a payment to continuing and retired suppliers who made contributions between July and September 2016, and to any suppliers who recommence supplying milk to Murray Goulburn by July 31, 2017. 

Fonterra said the additional payment will be available to all current, retired and recommencing suppliers.

"We believe this payment is the right thing to do and we're committed to ensuring our farmers are better off by partnering with us," Fonterra said. 

Fonterra will also reimburse Australian 85 cents/kgMS interest change for the  Fonterra Australia support loans package that was included in this season's milk price to all current suppliers.

The dual-listed units in the Fonterra Shareholders Fund rose 1.7 percent to $5.99 on the NZX, and were up 2.2 percent to A$5.65 on the ASX. 

(BusinessDesk)