Fonterra chief says milk prices to improve in second half of year

Milk prices should improve in the second half of the year, according to Fonterra Chief Executive, Theo Spierings.

He told the New Zealand Herald that the current milk price on the world dairy market is a demand problem, and not one of supply.

In an interview with the paper, Spierings said that there was a risk of farmers, and that New Zealand is getting bogged down with the negativity surrounding low dairy prices.

Milk prices in New Zealand have nosedived since hitting a record NZ$8.40/kg in 2013/14 to NZ$4.40 in 2014/15, the paper reports.

Spierings said that he was also confident there was not a lot of inventory lying around in the world’s warehouses.

The Fonterra chief said that he did not expect to see significant increases in supply from the three biggest dairy exporters – New Zealand, the EU and the US.

Next week, Fonterra’s board will meet to review its current milk price forecast of $5.25/kg of milk solids and analysts expect to see big downward revision of the forecast – some to as low as $3.75/kg, the paper said.

The co-op is also expected to update the market on its financial position, production and progress next Friday, August 6.

Fonterra has come under criticism recently for its performance, however, Spierings said the the dairy giant would not deviate from its current course.

The Fonterra Chief Executive countered criticism that the co-operative had not done enough to add value and said criticisms, made in the wake of its moves to cut costs and reduce staff, were “a bit out of balance”.

Spierings talked to the New Zealand Herald about moving Fonterra towards the “new world” as, like many other multi-national corporates, adapted to a new environment.

At the co-op’s first half results presentation in March, it announced dividend forecast range to 20c to 30c from a previous range of 25c to 35c a share for the current year, alongside an unexpectedly large 16% fall in its first half net profit to NZ$183m.