Fonterra sent a letter to its Australian suppliers on May 26 with details of its new milk supply agreements, a week ahead of the deadline for all processors to publish their prices for the new season.
“Our opening price is higher than the current season, reflecting improved global market conditions, although dampened by a continued soft domestic outlook,” Fonterra Oceania managing director David Breckenridge said.
“Geopolitical tensions and potential trade disruptions, along with currency volatility continue to create uncertainty for the longer-term outlook,” he said.
“However, there are favourable signals for the season ahead that are building optimism for F26, including the increase in global dairy prices over the last 12 months.
“Global demand has shown signs of growth, with constrained global supply driving an uptick in global prices throughout the year.
“Australian dairy exports have strengthened on the previous year in value and volume. These improvements have been supported by a return to balance between local and global dairy prices and a favourable yet volatile Australian dollar.”
Mr Breckenridge said the domestic market, where the company directs the majority of its milk, remains challenging.
“Inflationary pressures have yet to fully ease, and segments of Australian consumers continue to chase value through lower-cost dairy products,” he said.
“Foodservice channels, both locally and globally, are facing a multi-year recovery as even lower-cost restaurants are challenged as households eat out less.
“While there’s room for local demand to lift, we remain confident in the strength of our business and ability to be competitive on price as we navigate these conditions throughout the season.
“This is underpinned by the diversity of multiple dairy product types, sales channels, and markets that we sell into.”
Mr Breckenridge said as part of the company’s bi-monthly review process, they will continually assess market conditions and look to increase the milk price when it’s supported by the market and our business performance, as they did in F25.
“We remain confident in the strength of our business to pay a competitive milk price as we navigate these conditions throughout the season.”
He acknowledged the prolonged dry conditions and the impact on farmers right across the industry.
“These challenges are well understood throughout our business, and it remains our priority to support you in partnership through Farm Source Professional and our regional teams,” he told suppliers.
The company opened the 2024-25 season with $8/kg.
While the 2025-26 offer of $8.60/kg MS is an improvement on that, it’s still well off the highs of 2023-24 when it opened at $9.20/kg.
Under the Dairy Code of Conduct, enforced by the Australian Competition and Consumer Commission, any dairy processor intending to purchase milk in the next financial year must publish their milk supply agreements on their website before 2pm on June 1.
Because June 1 falls on a Sunday this year, the deadline is 2pm on Monday, June 2.
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