New Zealand dairy giant Fonterra has sent a strong signal to its competitors with its latest price step up.
The company yesterday increased prices for buttermilk and protein, taking the average farmgate price to more than $6.60 a kilogram of milk solids.
Fonterra director Bruce Donnison says his company’s on track for a $7 a kilogram closing price.
«We still see strong demand and that bodes well for not only the end of this year but going into next year,» he said.
Mr Donnison says he expects prices will continue to increase during the next season.
«I think we are in for a cracker year next year and we should try and capture those opportunities as much as possible right throughout the whole value chain,» he said.
Fonterra will pay an extra 16 cents per kilogram of butterfat and an extra 40 cents per kilogram of protein.
Last month, Murray Goulburn announced a step up that took its average price to just over $6.50 per kilogram of milk solids.
Murray Goulburn expects its closing price will be around $6.70 per kilogram.
In January, Warrnambool Cheese and Butter announced its average price had increased to $6.40 per kilogram and forecasted a closing price around $6.50 per kilo.
Rabobank’s Greg Bott says global demand is outstripping supply, which is ultimately pushing up farmgate prices.
«The demand side is growing at a phenomenal rate,» he said.
«China has a huge milk shortage from their own supply flowing on from the melamine crisis back in 2008 – that is the key driver.
«We’ve done an analytical look at the whole milk issue over the next seven or eight years and we can see that world demand will grow beyond what we can produce.»
Source: ABC