Photo: RNZ
- Fonterra lowers milk price forecast midpoint again
- Strong global supply weighing on prices
- Global Dairy Trade auction has fallen at nine consecutive meetings
Fonterra has lowered its milk price forecast as strong supply in the global market weighs on global prices.
The co-op reduced the forecast range on its Farmgate Milk Price from $9-$10 per kilogram of milk solids to $8.50-$9.50 per kg.
The midpoint was lowered from $9.50 to $9.
The co-op previously lowered the midpoint in late November.
Fonterra chief executive Miles Hurrell said: "With half the season still to complete, we continue to experience strong milk flows both in New Zealand and globally, particularly out of the United States and Europe, and this continues to put downward pressure on global commodity prices."
The announcement comes days after the most recent Global Dairy Trade auction, which saw prices fall for the ninth consecutive time.
"Combined with a rising New Zealand dollar since the last milk price update in November, we are required to further adjust the forecast range for the season and lower our midpoint," Hurrell said.
He noted Fonterra started the season with a wide forecast range of $8-$11 per kg and the new $9 midpoint was within that range.
"We remain committed to maximising returns for farmer shareholders through both the Farmgate Milk Price and earnings, strong customer relationships and a firm focus on margins, product mix, and operational efficiencies," Hurrell said.
ANZ agricultural economist Matt Dilly said global milk production had exceeded expectations, led by Europe and the United States.
He would not be surprised if there were further reductions in the milk price.
"It is unusual for prices to drop at this many auctions consecutively, so we could see a small bounce back, but the writing is in the wall that we're in a bearish market for dairy at the moment."
But Dilly said farmer confidence would be affected but Fonterra shareholders could look forward to a capital return from the sale of its consumer brands, which would soften the blow.
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