A litre of milk could cost consumers as much as 20c more on the back of news Fonterra expects to pay its suppliers more for their milk next season.
Shoppers could have to cope with a 20c rise if the forecast payout went close to $8 a kg of milk solids late next season, as the company had hinted, Fonterra Brands managing director Peter McClure said.
A three-litre container of milk sells for about $4.85.
While the New Zealand economy was expected to benefit to the tune of nearly $2 billion from the higher export dairy returns next season, Mr McClure said consumers would pay more for their milk, although prices of cheese, butter and other products were less likely to move, having increased in price in recent months due to international price pressure.
A few months ago, cheese could be bought on special for $2.99 for 500g but was now selling for about $4.
Rising international demand for dairy products and a shortage of supply prompted Fonterra on Tuesday to announce it expected to pay farmers about $6.60 a kg of milk solids next season, with the possibility it could go close to $8 a kg/ms if the New Zealand dollar continued to weaken against the United States dollar.
A $6.60 kg/ms milk price was 50c a kg/ms higher than the current forecast price to farmers for this season.
In addition to those milk prices, shareholders receive a dividend based on the performance of Fonterra's added value companies, such as Fonterra Brands, which was forecast to add another 30c to 50c a kg/ms to each shareholder's income.
Mr McClure said milk was an international commodity and domestic prices were subject to international movement, just like oil and wheat.
"It's no different with dairy.
If we didn't pay those prices, farmers would be more incentivised to send all their milk overseas," he said.
Fonterra treated Fonterra Brands like any other customer, and it had to pay the market price for its milk just like competing food producers such as Goodman Fielder, Mr McClure said.
Any price movement would happen from July.
