Saputo, which owns Warrnambool Cheese and Butter, has stepped up its farmgate milk price by 10 cents a kilogram milk solids (kgms) from $5.95 kgsms to $6.05 kgms for the 2018/19 season for all WCB and Saputo suppliers in its Southern milk region.

The increase involves a 7c/kg increase for butterfat and a rise of 14c/kg for protein.

The step up payment is retrospective and applies to all qualifying milk supplied by current WCB and Saputo suppliers from July 1, 2018. The payment will be made with January 2019 proceeds during February 2019. 

A Saputo spokesman said while world dairy markets had improved recently due mainly to the easing of world growth in milk production and a reduction in skim milk powder stockpiles in the European Union, prices had declined across dairy commodities during the first half.

"As such, this price increase reflects our acknowledgement that farm conditions remain challenging for our suppliers and any sustained market recovery is still ahead."

"We will continue to monitor the market and review the milk price again in April 2019, in accordance with our quarterly review process," Saputo said.

Bega, which last year took over the former Murray Goulburn dairy factory at Koroit, also this week announced a 14c/kgms increase to its south-west suppliers.

Bega has been an active player in the regional milk market as it seeks to build up milk supply to the Koroit factory that was operating significantly under capacity when it acquired it in a forced sale from Saputo last year.

Bega’s operational manager for the Koroit factory, Chris Evans, said this week the plant was expected to process about 400 million litres this financial year, up from the 340 million litres it processed last finanical year.

Bega chairman Barry Irwin said the 14c kgms loyalty payment and milk price increase announced this week was a response to competition and the returns the company was receiving from the dairy market.