Fonterra proposes paying its Australian farmers - who are contracted as suppliers, rather than as members of the Fonterra cooperative - more this season than it is offering farmers at home.
In May, Fonterra said it plans to pay its cooperative members in New Zealand $NZ4.55 a kilogram of milksolids, down from the prediction the 2009 season payout of $NZ5.20/kg.
Fonterra's Australian arm announced its opening milk price of $A3.60/kg ($NZ4.61/kg) at the same time as another big company, UDP, announced a forecast average annual return of $A3.45/kg.
Fonterra's Australian milk services manager, Heather Stacy, told The Weekly Times the company's prices reflected "the difficult conditions the industry is currently experiencing as a result of the global recession".
"Milk powder is currently trading internationally at less than $US2000 per tonne while at the same time the Australian dollar is up around US80c," Ms Stacy said.
"These factors are putting severe downward pressure on Australian prices.
Ms Stacy said Fonterra was "acutely aware that many dairy farmers are doing it tough due to the drought, high input costs and the recent volatility in the milk price."
"Fonterra is offering support to our suppliers, such as interest-free payment advances for the next six months, to help them manage their cash flow and make informed decisions," she said.
UDP managing director Tony Esposito told The Weekly Times the company will be paying suppliers an annual average of $A3.45/kg.
The announcements by Fonterra and UDP follow news that Tatura Milk Industries will pay its 300 suppliers $A3.80/kg ($NZ4.86/kg) - equivalent to A28c a litre - this season.
And the ABC reported two of the largest milk processors in southwest Victoria on Friday announced big cuts in their milk prices.
Warrnambool Cheese and Butter has cut its price from A35c/litre, to A28c/litre and Murray Goulburn said it would pay A26c/litre.
One Victorian dairy farmer, Graeme Prince, of Larpent, predicted older farmers may quit and young farmers will come under huge financial pressure.
The ABC reported up to a third of Goulburn Murray dairy farmers will leave the industry because of this year's low milk price.
Waaia dairy farmer and Murray Goulburn supplier,Max Baker said the prices were a blow to farmers who have had several dry seasons.
"We had a good start to this season and that'll make a difference if we can grow our own feed... but if we get another dry season and bought-in feed, I dare say, and I'm only guessing this figure, but I reckon there'll be a third of dairy farmers in the Murray and Goulburn valleys go out of dairy farming," he said.
"It's just unsustainable levels."
