In a bid to address the problem of decreasing milk supplies, Bonlac Foods is upping the prices paid to milk suppliers by 29%.

Bonlac witnessed a 7.8% drop in revenue for the financial year to 30 June 2001, and has attributed this decline to the number of suppliers abandoning the company.

An A$80m (US$40m) cash injection made by New Zealand's Fonterra Co-Operative Group in May 2001, for a 25% stake in Bonlac, has meant however that the company can afford to up its prices for supply.

Prices paid for butterfat, for example, have increased to A$7.17 per kilogram from the A$5.55 offered to farmers a year ago.