Fonterra Australia lifted its farmgate payout by A$0.35 while Murray Goulburn said it was setting aside a one-off sum of more than A$80 million to pay more for milk supply and fund loans for struggling farmers.
«Prices are getting back to break-even levels for farmers,» said Michael Harvey, a senior dairy analyst at Rabobank. «It is encouraging and it gives them immediate cash flow, which is a good sign.»
Fonterra said in a statement it had increased its average farmgate milk price to A$5.10 ($3.89) per kilogram of milk solids (kgMS) for the 2016/17 season from A$4.75, after seeing increases in auction prices in August and September.
Prices for dairy ingredients like milk and butter have fallen sharply for more than two years, hit by a global oversupply, squeezing the finances of farmers and producers and pushing many towards consolidation in search of economies of scale.
There are hopes of an ongoing recovery in dairy prices after average prices at a fortnightly global dairy auction have risen 26 percent since July.
«Although the global market remains volatile, since the beginning of the season, global milk supply has continued to decline significantly while demand has remained relatively stable,» Fonterra Australia Managing Director René Dedoncker said in a statement.
Australia’s largest dairy processor Murray Goulburn also said on Thursday it would take a one-off sum of A$81.8 million ($62.5 million) from the profit pool of its publicly traded MG Unit Trust.
The company would use A$50 million to pay farmers $0.02 per kgMS more for their milk supplies and A$31.8 million to supplement its farmer loan scheme.
Murray Goulburn in April slashed the prices paid to farmers for their milk after conceding that its strategy of exporting high-valued products such a nutritional dairy products to countries like China was not working.
But, with the announcement coming so late into the season, farmers said they had no choice but to maintain production levels, despite incurring mounting losses.
However, analysts were hopeful that the mid-term picture for farmers’ finances was rosier.
«We do see some further steam in the rally of milk prices,» said Rabobank’s Harvey.
Source: Reuters
Link: http://www.reuters.com/article/australia-dairy-idUSL4N1CX1D5
