Fonterra lowers milk money at the last minute

The latest milk price forecast for the 2018/2019 season, which ends this month, has been adjusted downwards. The top of the range has been reduced by $0,20 to $6,40 per kilo of milk solids*. The bottom remains at $6,30. The final milk price for this season will be announced in September.

Lower dividend
The dividend has also been reduced and will probably be between $0,10 and $0,15 per kilo of milk solids. In the previous forecast, the expected dividend was still $0,10 higher. The reason for the downward adjustments is that Fonterra was too optimistic in the preliminary stages regarding the price development of whole and skimmed milk powder.

Prices have indeed risen, but less rapidly than the cooperative thought. In addition, the price of whole milk powder on the Global Dairy Trade (GDT) has shown a slight decline again since March. Whole milk powder is the most important dairy product for Fonterra.

Next season: higher milk price
Fonterra has also announced the first milk price forecast for the 2019/2020 season, which starts in June. The price is between $6,25 and $7,25 per kilo of milk solids. During the season, the top and bottom of the forecast move towards each other, as is usual.

The forecast shows that Fonterra is optimistic about the development of the milk price in the coming months, as the forecast for next season is higher than current prices. Fonterra itself talks about a realistic forecast. The higher price is based on good demand from the various export regions. 

At the same time, the dairy cooperative is keeping a close watch, because it is difficult to look far ahead. After all, the dairy market is very dependent on the weather conditions in the various production regions. Without complications, Fonterra expects the milk supply to be slightly higher than this season.

* 1 kilo of milk solids is 11,5 liters of milk.
** This article concerns New Zealand dollars.