26 Oct 2011

Lower milk price signalled

4:36 pm on 26 October 2011

Fonterra chairman Sir Henry van der Heyden has signalled a fall in domestic milk prices.

Fonterra has revised this season's forecast milk payout downwards.

Sir Henry told Morning Report global dairy prices had softened over the past few months, dropping 15.7% on average.

He said milk prices should drop because what New Zealand consumers paid for milk followed international prices.

Sir Henry said Fonterra did not set the retail price.

In February, the company froze wholesale domestic milk prices until the end of the year after an outcry over soaring prices.

The country's two biggest supermarket chains say they will lower retail prices if the wholesale cost is lowered.

Foodstuffs says it welcomed the milk price freeze and would pass on any drop in wholesale costs to customers.

Progressive says it will also pass on savings.

On Tuesday Fonterra announced a revised payout for the season of $6.30 per kg of milk solids - 45 cents lower than the opening payout forecast announced in May.

The total forecast of $6.70 - $6.80 in milk payments and share profits is more than $1 lower than last season's record $7.90.

Fonterra is blaming falling world commodity prices and a strong New Zealand dollar for the drop.