Inside Milk
Arla also lowers in June, Fonterra adjusts forecast
Arla is the first major European dairy processor to announce a drop in milk prices in June. At the last minute, the New Zealand dairy cooperative Fonterra also lowered the milk price forecast for the current season.
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The Scandinavian dairy cooperative reduces the basic milk price for the coming month with €0,99 to €31,80 per 100 kilos, with an annual supply of 1 million at 3,57% protein and 4,42% fat. It is the third reduction in a row. Including bonuses, the milk price in the Netherlands can rise to €35,30.
Explaining the change, Arla director Arthur Fernall says that the dairy market is significantly affected by the government measures regarding the coronavirus. The prospects are also uncertain. Next Monday, FrieslandCampina will announce the guaranteed price for June. And since reference company Arla has lowered, this increases the chance of a next correction.
Fonterra lowers milk price
The latest milk price forecast for the 2019/2020 season, which ends this month, has been adjusted downwards. The midpoint of the range has been reduced by $0,40 to $7,20 per kilo of milk solids (approximately 11,5 liters of milk). The expected dividend, a range between 15 and 25 dollar cents per kilo of milk solid, remains unchanged. The final milk price for this season will be announced in September.
The dairy cooperative previously announced that members should take into account that the milk price will drop significantly in the new season. There was also a call at that time not to just make investments. In addition to the lower milk price, dairy farmers in New Zealand are plagued by persistent drought, which has made roughage considerably more expensive and is putting pressure on milk production.
The reduction in the milk price is the result of falling dairy prices in recent months, as a result of the corona crisis. Fonterra is a major dairy exporter and was confronted with a drop in demand, including from China.
On track for profit
Fonterra is on track to end the broken financial year 2019/2020 with green figures. Between June and April, pre-tax profits were $815 million. Last year the New Zealand Dairy Cooperative recorded a million dollar loss of $605 million, while negative benefits amounted to $196 million the year before. To turn the tide, Fonterra recently introduced a new strategy that is apparently paying off.