Fonterra Lifts Milk Price Forecast as Global Glut Wanes

New_Zealand_Bloomberg_Dairy_Cattle
New_Zealand_Bloomberg_Dairy_Cattle

Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, raised its forecast milk payout for the current season after prices jumped at auction, adding to signs a global oversupply is starting to wane.

Auckland-based Fonterra on Wednesday lifted its estimated farmgate milk price by 50 NZ cents to NZ$4.75 ($3.47) a kilogram of milksolids for the season ending May 31, 2017. The company maintained an earnings-per-share forecast of 50-60 NZ cents, taking the total payout available to farmers to between NZ$5.25 and NZ$5.35 a kilogram.

“Current global milk prices remain at unrealistically low levels, but have started to improve as global demand and supply continue to rebalance,” Chairman John Wilson said in a statement. “Milk production is reducing in most dairying regions globally in response to low milk prices and this is bringing the world’s milk supply and demand back into balance.”

The increased forecast will bring some relief to New Zealand dairy farmers, most of whom are operating at a loss after milk prices plunged amid the global glut. While today’s estimate is an improvement on last season’s payout of NZ$3.90 a kilogram, which was a nine-year low, it is still well below the record NZ$8.40 in 2013-14.

Firmer Kiwi

The New Zealand dollar rose on Fonterra’s statement and bought 73.17 U.S. cents at 11 a.m. in Wellington from 73.12 cents beforehand. Whole milk powder prices surged 19 percent at the last fortnightly GlobalDairyTrade auction Aug. 16.

Fonterra’s announcement was not scheduled, “but it comes as no surprise given the extent of the improvement in world dairy prices in recent weeks,” said Michael Gordon, acting chief New Zealand economist at Westpac Banking Corp. in Auckland. “We recently revised up our milk price forecast to NZ$5 per kilogram, which we regard as a cautious estimate.”

ASB Bank said it continues to expect a final milk price of NZ$6 for this season.

Wilson said while prices have increased on GlobalDairyTrade, the strength of the kiwi dollar, which has gained 8.6 percent the past three months, “continues to offset some of these gains.”

“We expect the dairy market to be volatile over the coming months and will continue to keep our forecast updated for our farmers as we move into the season,” he said.

 

Latest News

Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps
Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps

U.S. employers report challenges in finding suitable job candidates with work-ready skills to fill open roles in ag. The AgCareers.com U.S. Skills Survey offers insights, data and trends to address skill development.

Built Out of Love: How Two Sisters Created a Super-Fast-Growing Yogurt Company
Built Out of Love: How Two Sisters Created a Super-Fast-Growing Yogurt Company

Travel to the rolling hills of Pennsylvania, and you’ll meet Hayley and Stephanie Painter who not only made the Forbes 30 under 30 list, but have also created one of the fastest growing yogurt company in the U.S.

"Boring" Technology Will Reshape Dairy Over the Next 10 Years
"Boring" Technology Will Reshape Dairy Over the Next 10 Years

Once a technology becomes a boring experience it means it has become proven, well-adopted, and easy to utilize. There are three "boring" technologies silently shaping the industry.

Influential Dairy Leaders Awarded World Dairy Expo Recognition Awards
Influential Dairy Leaders Awarded World Dairy Expo Recognition Awards

World Dairy Expo is delighted to announce the recipients of the 2024 Expo Recognition Awards. These individuals have made remarkable contributions to the dairy industry and their communities.

Meat Institute: Properly Prepared Beef is Safe to Eat; HPAI is not a Food Safety Threat
Meat Institute: Properly Prepared Beef is Safe to Eat; HPAI is not a Food Safety Threat

According to the Centers for Disease Control and Prevention (CDC) and USDA food safety experts, properly prepared beef is safe to eat and is not a food safety risk to humans.

BREAKING: Mystery Illness Impacting Texas, Kansas Dairy Cattle is Confirmed as Highly Pathogenic Avian Influenza Strain
BREAKING: Mystery Illness Impacting Texas, Kansas Dairy Cattle is Confirmed as Highly Pathogenic Avian Influenza Strain

USDA says genetic sequencing revealed the mystery illness impacting Texas dairies is the same strain of Highly Pathogenic Avian Influenza (HPAI) that's been in the U.S. The virus is carried by wild waterfowl.