Fonterra increased dairy farmers milk price by 50c
Dairy giant Fonterra has raised its forecast milk price for farmer suppliers by 50 cents to an effective $7.25 per kilogram of milk solids.
It’s the latest twist in what’s looking like a very up and down season for farmers.
Just before the latest season started in June Fonterra gave an initial forecast of, in effect $8 per kgMS, but then ended up cutting that all the way back to $6.75 in the face of flagging global dairy prices.
Auction prices at the GlobalDairyTrade events slumped by some 16% from the beginning of the season through till mid August.
However, since then there’s been three successive auctions of gains, collectively sending overall dairy prices up again by 12%.
Fonterra’s practice these days is to forecast its milk price in a range. At the beginning of the season this is a wide range and as the season progresses the range is narrowed.
The new forecast issued on Monday for the 2023-24 season is for a range of $6.50 – $8.00 per kgMS, with a new midpoint of $7.25 per kgMS, up 50 cents. The last forecast, issued in mid August was for a range of $6 to $7.50.
Fonterra chief executive Miles Hurrell says the improved outlook reflected “both supply and demand dynamics”.
“Here in New Zealand we’re forecasting collections to be slightly below last season, while aggregate milk growth in key export countries is expected to be below average for FY24. The El Niño weather pattern may have further impacts on supply, and this could be driving recent buyer sentiment.
“On the demand side, we have seen increases in recent Global Dairy Trade events. While this has been encouraging, it is not yet clear whether the stronger demand from China will be sustained. For other key regions, customers remain relatively cautious in terms of their forward purchases.
“It’s still early days in terms of the proportion of our FY24 sales book that we’ve contracted, so we still face significant exposure to volatility in commodity prices. Exchange rate volatility is another factor to keep in mind. Our foreign exchange hedging strategy is designed to help lessen the impact of this, and also supports a higher Advance Rate level than would be possible without hedging.
“We’ll continue to let our farmers and the market know as soon as we can when we think things have materially shifted,” Hurrell said.
Fonterra paid a price of $8.22 to its farmers in the 2022-23 season.
Source : Interest NZ Oct 9th 2023