Major milk processors slash prices for Australian dairy farmers

Major dairy processor Fonterra has slashed its farmgate milk prices for the 2016-17 financial year, which could force some Australian diary farmers out of the industry, AAP reported on Thursday.

It follows announcements by Murray Goulburn and Bega Cheese who will also cut their farmgate milk prices.

United Dairyfarmers of Victoria president Adam Jenkins told AAP Fonterra's opening price is below the cost of production on many dairy farms.

"That is a concern. It has come off a long way, and after two very dry seasons, people are particularly nervous about what that means for their business," Jenkins said.

Fonterra chief operating officer Judith Swales said in a statement that the company's opening price for the 2016-17 financial year reflects current market conditions.

"Our forecast is based on the Australian dollar holding at around 74 cents to the U.S. dollar and reflects the revenue we expect to earn on products produced using our manufacturing assets," Swales said.

"Our farmgate milk price in Australia is also impacted by global dairy markets given our mix of domestic and export sales."

Bega Cheese last week announced an opening farmgate milk price of 5 Australian dollars per kilogram of milk solids.

Murray Goulburn announced this week it would pay 4.31 Australian dollars per kilogram of milk solids, rising to 4.80 over 2016-17, while Fonterra will pay 4.75 Australian dollars, rising to 5 Australian dollars later in the year. Endit