Inflation depresses milk price from dairy giant Fonterra

The milk price forecast for the 2022/2023 season has been reduced by NZ$0,25 to a range of $8,50 and $10 per kilo of milk solid. This means that the milk price is still higher than the last forecast price for the underlying season, which ended in June. This will be definitively determined at the end of September, together with the publication of the annual figures for the past broken financial year. 

Global Dairy Trade under pressure
In an explanation of the correction, Fonterra invokes the series of price reductions of the Global Dairy Trade. The important indicator of the mood in the global dairy market has lost almost 20% in recent months. Dairy commodities and butter, cheddar and milk powder were markedly depreciated. In the meantime, the dairy market in Europe is picking up again due to increased internal demand, but those signals are not visible elsewhere.

CEO Miles Hurrel says the weaker dairy market is due to disappointing demand, prompted by high inflation in many countries. This puts pressure on purchasing power. Hurrel is, however, reasonably positive for the longer term. He expects dairy prices to hold up reasonably well, despite the uncertain economic conditions. 

Lower milk supply in New Zealand
A support in the market is the lower milk supply. In the meantime, the supply in New Zealand is climbing out of the seasonal dip, but production is lagging behind last year. In July, the supply amounted to 288.000 tons, a decrease of 5,5% compared to last year. Milk production in New Zealand in the current season is expected to be limited compared to last season.