Fonterra has again cut its forecast farmgate milk price for the 2022/23 season due to a drop in dairy demand from China along with the northern hemisphere entering peak milk production.
The New Zealand co-operative confirmed that its forecasted milk price range for the season will drop to NZ$8.00 to NZ$8.60/kg of milks solids, with a midpoint of NZ$8.30.
The previous forecast, announced in February, was NZ$8.20–8.80/kg of milk solids, with a midpoint of NZ$8.50.
Milk price
Fonterra chief executive Miles Hurrell said that the decision reflects short-term demand for dairy products which are used by the co-op to set the milk price being “softer than expected”.
“Since our last update in February, prices for our products on Global Dairy Trade (GDT) have either declined or remained flat.
“Skim milk powder (SMP) prices have fallen 7% since February, and whole milk powder prices have not lifted to the levels assumed in the previous forecast.
“There are two main drivers behind this. The first is demand from China for whole milk powder has not yet returned to expected levels.
“The second is Northern Hemisphere milk production, and therefore skim milk powder stocks, are increasing as they head into their Spring flush.
“With these factors weighing on demand, prices have not increased to the levels required to sustain a higher forecast farmgate milk price for this season,” he said.
Fonterra
The Fonterra chief executive said that the co-op recognised that the drop in price would impact farmers who are already grappling with increased input costs.
“To assist on-farm cashflow, we are adjusting the advance rate schedule, which is the proportion of the season’s farmgate milk price paid to farmers each month, to get cash to our farmers earlier.
“We have increased the March paid April payment and plan to hold payments at that level until June,” he said.
Last month, Fonterra announced a half-year profit after tax of NZ$546 million (€279 million), which is up 50% on the same period last year.
The co-op’s full-year forecast of normalised earnings per share of 55-75c remains unchanged.
“We remain positive about the outlook for next season and will share our opening 2023/24 farmgate milk price forecast in May,” Hurrell said.