Inside Milk
Fonterra forecast price takes another step up
The New Zealand dairy cooperative Fonterra has again increased the forecast for the basic milk price for this season. The dairy processor reported this on Friday, March 5. The continuous increases in the Global Dairy Trade are reason for the dairy to increase this so-called Farmgate Milk Price for the fifth time.
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Fonterra increased its base milk price forecast to a range of $7,30 to $7,90 per kilo of milk solids (New Zealand dollars per 11,5 litres). It is a significant increase compared to the previous forecast price: $6,90 to $7,50 per kilo of milk solids. The average milk price paid to farmers therefore amounts to $7,60 per kilo. This is converted, depending on the fat and protein values and according to the current exchange rate, to approximately €39,50 per 100 kilos.
The price increase is due to continued strong demand for New Zealand dairy. This is also reflected in the Global Dairy Trade (GDT). “Since our last increase in February, GDT quotations have continued to rise, prompting us to further increase our base milk price forecast,” Fonterra CEO Miles Hurrell said in a press statement. Dairy prices in New Zealand already rose by 4% on Thursday, March 15.
China active in the market
The good demand for dairy from New Zealand is mainly driven by China. “China's strong economic recovery from the coronavirus pandemic is reflected in strong demand for dairy products,” Hurrell said. Mark Voorbergen, managing partner at Dairyntel, underlined this too Boerenbusiness. “Asians prefer products of New Zealand origin, which are considered premium, and so are willing to pay more for them.”
The Chinese use their own milk for fresh dairy products and they turn to New Zealand for products that need a longer shelf life. You should especially consider whole milk powder. The price of this product increased by 21% last week alone. “This market has a major influence on the now rising forecast price,” Hurrell said in the press statement.
Westpac and ANZ also increased forecasts for basic milk prices. Westpac's price rose by $0,40 to $7,90 per kilo of milk solids and ANZ added $0,50 to the forecast milk price. This increases to $7,70 per kilo of milk solids.