Around 35% of New Zealand dairy farmers are due to make a loss this year, with some commentators saying that 50% could be in the red by year end.
But Fonterra CEO Theo Spierings has defended the price Fonterra is paying its farmers and says the company’s product mix is good and that global demand for milk will drive milk prices back up.
Fonterra has seen milk supplies grow by 22% in recent years, even though it has seen the number of suppliers drop from 96% to 87% of New Zealand dairy farmers.
Speaking to Radio New Zealand recently, he said it does not want to lose more market share.
Farm families, he said, are very important to Fonterra and it has worked to ensure a better return for its farmer suppliers.
“This financial year we are selling 26% of our solids on the Global Dairy Trade and that used to be over 40%, so we are selling less on that platform and that should drive a stronger milk price.
“But, around the world, serveral issues in strong demand regions of China, Russia and the Middle East.
“Demand around the world will drive the milk price back up.”
He said to provide a better return to New Zealand dairy farmers Fonterra is looking at both driving top line with volume and value growth – both have to increase, he said.
“If we only focus on value added, we are losing scale and we lose our ticket to the game in the global game.”