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Fonterra fights back at new high milk price
Fonterra expects a milk price for the new 2022/2023 season that will be slightly lower than in the current production season. It is only an expectation, but with extra blows to the arm. The milk price could also be higher than the current record milk price.
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CEO Miles Hurrell said this during a business update about Fonterra's third quarter.
Average price 30 cents lower
For the current production year, which ends at the end of June, a milk price of NZ$9.10 to 9.50 per kilo of milk solids (combined fat and protein) and a median price of NZ$9.30 are still assumed. For the new year from July 1, a price is expected to be between NZ$8.25 to 9.75 per kilo of milk solids and a median price of NZ$9.00.
The forecast for the new season takes into account an extra large bandwidth due to the many uncertainties in the market. These uncertainties consist of the corona pandemic, which is still causing many problems in large parts of Asia, the war in Ukraine and the economic tensions this all causes. On the other hand, the expectation is that milk supplies will continue to be tight, which could further drive up prices.
Problems Sri Lanka
With the third quarter behind us, Fonterra notes that it has had a good year financially so far, but that there is pressure on margins due to high milk prices. Fonterra is seeing earnings in Sri Lanka in particular slump due to the political and economic crisis in that country. There is also some pressure on margins in China, although good earnings are still being made. Fonterra performs best in terms of sales in the Middle East and Africa. In the meantime, the dividend expectation remains unchanged at 25 to 35 dollar cents per share.
Strong dip after recovery in March
Seasonally, New Zealand is now entering the time when milk supplies reach their lowest point. This trend is also reflected in the figures from the New Zealand and Australian governments. In April, the supply fell again seasonally, after a strong recovery in March, caused by heavy autumn rains. The phenomenon was noticeable in both New Zealand and Australia, but much more pronounced in the former country and stronger this year than last.
In April, milk supplies in New Zealand fell to 1,43 billion kilos, from more than 1,8 billion in March. This is more than 5,6% lower than in April 2021, but higher than in the fourth month of 2020 and 2019. In Australia, supply fell from 596 million kilos in March to 583 million kilos in April. This is 6,6% lower than in April 2021.