The cut follows a more severe cut by Murray Goulburn, Australia’s largest milk processor who has cut its forecast milk price to $4.31/kg (24c/l).

Judith Swales, Fonterra’s chief operating officer of velocity and innovation, said "our forecast is based on the Australian dollar holding around 74 cents to the US dollar and reflects the revenue we expect to earn on products using our manufacturing assets."

She also said that their farmgate milk price is also impacted by global dairy markets given their mix of domestic and export sales.

"While we are still seeing an imbalance between global milk supply and demand there are signs in key milk producing areas of a slowdown in production and increased imports into key markets such as China, Asia and Latin America. This supports our view of a recovery in global prices as we move through the season," she said.

Investigation

Both Fonterra and Murray Goulburn cut this season’s forecast milk price in May of this year and are being investigated by the Australian Competition and Consumer Commission.

If they are found guilty of misleading conduct or elements of unconscionable conduct they could possibly face fines of $1.1m each (€807,400).

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Dairy Trends: Signs of further recovery in dairy markets