Saputo follows Fonterra with opening milk price for season 2024-25

It follows Fonterra's announcement of an opening price of $8/kg MS on May 30.

Both major processors have announced their opening prices ahead of the June 3 deadline under the mandatory Dairy Code of Conduct.

"Our opening milk price factors in ongoing global market volatility due to subdued demand, as well as greater variability in domestic markets and anticipated market returns," SDA director of milk supply and planning Kate Ryan said.

"As we see more market certainty, we would expect to review our prices during the year."

Ms Ryan said the company's strong business position "supports us paying a premium above current commodity price returns".

"This is due to business efficiencies achieved over recent years, including network optimisation initiatives taken to strengthen our competitiveness, reduce costs and ensure higher utilisation through our facilities," she said.

"As part of SDA's long-term commitment to the Australian dairy sector, we continue to support our farmers' growth and business success with a range of ongoing specialised services and programs, while also investing in our operations, in the industry and in our regional communities."

The opening prices are in line Rabobank's forecast.

Rabobank, in its Australian Dairy Seasonal Outlook 2024, 'Walking a Tightrope', released in May, forecast a minimum farmgate milk price range of $8-8.20/kg MS.

Report author, RaboResearch senior dairy analyst Michael Harvey said Australian dairy companies found themselves "walking a tightrope", needing to send strong price signals to milk suppliers, while navigating a backdrop of softer market returns.

"In a market short of milk - and with an ambition to build momentum around the current milk supply recovery in Australia - dairy companies need to present sustainable milk price signals to suppliers in order to remain competitive," Mr Harvey said.

"However, Australia's milk supply recovery is ahead of schedule - with some excess volumes being channelled toward bulk ingredients and commodities, which are under performing in local and export markets - meaning parts of the product mix are loss-making.

"The domestic market is delivering better returns for dairy following a period of hyperinflation across the grocery aisle, but consumers choosing to trade down as a result of cost-of-living pressures is negatively impacting the domestic retail channels."