Psst, all those moaners and groaners about hard times in the dairy industry — there’s another price rise coming, if the second increase in a month from the giant Kiwi dairy group Fonterra is any guide. Fonterra this morning boosted its farmgate milk price by 50 cents to NZ$5.25 per kilogram of milk solids, which means nearly an extra NZ$1 billion in revenue nationally and US$78,980 for the average New Zealand dairy farmer. It also brings the price to 20c above the break-even of NZ$5.05 calculated by industry group DairyNZ. The news came a day before Fonterra releases its latest financial results.

The news comes after a 1.7% rise in world dairy prices at the GlobalDairyTrade auction overnight Tuesday, lifting the index to an 18-month high. Prices are up 35% in the last five auctions. Fonterra has now lifted its forecast by NZ$1/kg MS, or 23%, since it retained its forecast on August 1 at NZ$4.25/kg MS.

On September 14, Murray Goulburn, which has been the focus of Victorian farmer complaints for the way it has handled its pricing and cuts to dairy farm incomes in a capricious manner, lifted its milk solids price by 15 cents a kilogram to A$4.46 (around NZ$4.60, still well below the new Kiwi price). That was below its competitors Australian prices — Fonterra at $4.75kg/ms, Bega at $5kg/ms and Warrnambool Cheese and Butter at $4.80kg/ms. Another price rise looks justified as quickly as possible, judging by the sharp rise in the global and NZ prices.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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