23 May 2012

Fonterra expects milk price will lift in August

7:04 am on 23 May 2012

Fonterra says milk prices will start to recover at the beginning of the new milking season in August as global dairy supplies ease.

Over 10,000 farmers saw 30 cents per slashed off their forecast milk payment for the 2011/12 season, taking it to between $6.45 to $6.55 a kilogram of milk solids.

The average Fonterra farmer supplies more than 100,000kg of milk solids in a season.

High commodity prices have triggered a step-up in global dairy production, and this extra supply has hurt dairy prices, with auction prices tumbling by more than a fifth since Fonterra's previous forecast in April.

Its opening estimate for next season's payout is between $5.95 - $6.05 per kg, but executives predict global dairy prices will slowly pick-up in August as volumes fall and demand from Asia rises.

BNZ economist Doug Steel, who tracks the dairy sector, says the volatility will continue for some months, with payout cuts for the two seasons carving $1.3 billion from the earnings for Fonterra.

He says the outlook remains positive for farmers and Fonterra.