Fonterra concerned about global dairy demand, but says it will bounce back
The CEO of Fonterra, Theo Spierings, has said he is concerned about the global demand for dairy but expects global demand for dairy to bounce back.
Speaking to Radio New Zealand, he said that while supply of dairy is good around the world, there is not a lot of spare inventory.
“I am concerned about demand. Supply is good all over the world. Europe, with the end of quotas, is only 1% up on last year, so it’s not a massive increase…but less and less milk is around, when we had signals of drought the price climbed.
“That implies that there is not a lot of inventory around. So people are holding back, but demand has to come back in. In China, the middle class is growing, and all the demographics are speaking for a growth strategy and demand will come back.”
The CEO of New Zealand’s largest company also addressed the current review of Fonterra that is taking place.
Global consultanting firm McKinsey & Co has been brought in by Fonterra to review the company as it comes under increasing pressure.
Some 35% of Fonterra farmers are expected to make a loss this year and are currently receiving NZ$5.25/kg for milk.
According to Spierings, McKinsey is looking at cutting costs and reviewing efficiencies to help increase the return to farmers.
It comes at a time when critics are calling for a fundamental restructure of the company.