New Zealand milk processor Fonterra has reduced its forecasts for both farmgate milk price and milk collections for the 2022/2023 season.
The co-operative, one of the largest dairy businesses in the world, said today (Friday, February 24) that its forecasted milk price range for the season would be reduced to NZ$8.20 to NZ$8.80 per kilograms of milks solids (kgMS), with a midpoint of NZ$8.50.
The previous forecast was NZ$8.50 – NZ$9.50 per kgMS, with a midpoint of NZ$9.00.
As well as that, Fonterra updated its forecasted milk collections for the 2022/2023 season to around 1.465 billion kgMS, down from a previous forecast of 1.48 billion kgMS.
Fonterra CEO Miles Hurrell said that the revised forecasted milk price range reflects softened demand at a time of balanced supply.
“Demand for whole milk powder…has been soft, with prices down around 5% since the beginning of December. While we are encouraged by recent increased buying behaviour from China, it is too soon to determine the extent of the impact this may have on the rest of the season,” he added.
Hurrell said that Fonterra remains cautious, given a soft economic growth outlook in many regions globally.
“Looking at milk production, while Fonterra’s collections for the season are up on this time last year, Cyclone Gabrielle and dry conditions in [New Zealand’s] South Island have impacted the co-op’s full season expectations.”
The Fonterra CEO commented that, globally, milk supply from other exporting regions is balanced.
“Production from Europe and the US is up on last year, but this is partly offset by lower collections in New Zealand, Australia, and Latin America,” he said.
Hurrell added: “The medium to long term outlook for dairy, in particular New Zealand, looks positive. We are assessing our position for next season and will provide our opening forecast in May.”
Fonterra to compensate farmers
Meanwhile, Fonterra has also said that it will make “appropriate compensation” to farmers who have been forced to dump milk or dry off cows because of the impact of Cyclone Gabrielle.
The New Zealand government has extended a national state of emergency order until February 27, covering several parts of the country.
According to Fonterra, many of its farmers in the North Island of New Zealand have been significantly impacted by the cyclone.