Fonterra Australia advised its suppliers it would increase its average farm gate milk price to $5.20kgMS.

The announcement means Fonterra has already reached its forecast closing price for the 2016-17 season that was predicted at the opening of the season in July. The 16-17 season will close with the financial year.

The improvement has been attributed to improvement in the global commodity markets and progress on key initiatives for the business.

 “Our strategy continues to progress, helping us to rebalance our product mix into products generating those higher returns, which we’re able to deliver back to farmers at the farmgate,” Fonterra Australia managing director Rene Dedoncker said.

 “This has helped to rebalance global supply, while demand has remained firm. As a result there has been a steady improvement in global dairy commodity prices and this is reflected in our farmgate price.”

Fonterra and Murray Goulburn shocked suppliers last year when both processors dramatically slashed the farm gate milk price to below the cost of production.

Murray Goulburn further shocked the industry by announcing the price cuts would be retrospective and be applied for the whole season.

Farmers protested strongly against the cuts, which forced many of them into debt and forced some of them to leave the industry.

Individual suppliers’ milk prices will vary across Fonterra’s supply regions, depending on the individual farm’s milk profile, regional production factors, milk quality and farm management systems. 

Fonterra is the largest milk processor for Tasmania with a small number of dairies supplying to Murray Goulburn, Lion and Mondelez, that owns the Cadbury brand.

A senate inquiry into the dairy crisis will hold public consultation sessions in Burnie on Friday.

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