17 Jul 2020

Fonterra lowers farmgate milk prices forecast

11:51 am on 17 July 2020

Fonterra has lowered the midpoint of its forecast farmgate milk price range for the season just ended by five cents.

Fonterra milk truck

Photo: RNZ / Rebekah Parsons-King

It now expects to pay farmers between $7.10 and and $7.20 per kilogram of milk solids, down from its earlier forecast of $7.10 and and $7.30 per kilogram of milk solids.

Fonterra chairman John Monaghan said this was the result of the New Zealand dollar strengthening against the US dollar over the past two months.

For the season just started, the earlier forecast range of $5.40 to $6.90 has been raised - it's now between $5.90 and $6.90.

Monaghan said the lift to the bottom end of the range was being predominantly driven by improved market conditions in China.

"After an initial shock due to Covid-19, dairy consumption in China is recovering with more people spending on food. We're seeing customers ramp up promotional activity as they look to catch up on the sales losses incurred over lockdown," he said.

"While there is still a high level of uncertainty in our global markets, we do see a lowering level of risk and this supports a decision to lift the bottom end of the price range."

Monaghan said despite this, Fonterra was still very early in the new season and farmers should budget with caution.

The co-operative will announce the final 2019/20 farmgate milk price as part of its annual result in September.