Fonterra has provided its Australian suppliers with a farmgate milk price increase, but dropped the forecast closing price for the season.

This comes just hours after Fonterra Co-operative in New Zealand cut its forecast this season.

Australian suppliers will receive a step-up of 13 cents a kilogram of milk solids which Fonterra said would bring its average price to $5.98/kgMS.

But in the same statement, Fonterra said it could cut its forecast closing range from $5.98-$6.20/kgMS to $5.98-$6.10/kgMS.

Fonterra Australia managing director René Dedoncher said the step-up would help support farmers facing “challenging conditions” but said market conditions were “putting downward pressure” on the upper end of its season end forecast.

“Rising costs for feed and water due to the drought means that cashflow is even more critical for our farmers,” he said.

“Receiving this increase in their milk payment now, rather than later in the season, will help our farmers make important decisions on input costs and plan for the remainder of the year.

“This milk price is reinforced by our strong Australian business which is performing well and generating repeatable returns, and is supported by tightening domestic supply of milk and the weakening Australian dollar.”

The forecast close price was impacted by increases in production though, according to Mr Dedoncher.

“A weaker currency has only partially offset the impact of an increase in production this season in some other dairy-producing countries. As a result, we have revised our forecast closing average milk price range to $5.98 to $6.10kgMS, down from $6.20kgMS.

“While it’s disappointing to have a reduction in the forecast closing price range, it’s important that we provide our farmers with clear, early signals on how the market is likely to impact the farmgate milk price.

“We continue to monitor currency and global dairy prices closely and will keep our farmers updated throughout the season with the latest market conditions.”

Earlier today, Fonterra in New Zealand dropped the forecast price from $NZ6.75 ($A6.15/kgMS) a kilogram of milk solids to $6.25-$6.50/kgMS ($5.92-$A5.70/kgMS). It cited more supply and demand in the global markets.

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