Fonterra lowers prognosis for new season

Fonterra members currently receive a milk price of NZ$8,20 per kilo of milk solids (combined fat and protein). That is already considerably lower than where the current season started. At that time the price was expected to be up to NZ$9,00 per kilo of MS. For the new supply season, an average price of NZ$8,00 per kilo of MS is now expected, in a range of $7,25 to $8,75.

CEO Miles Hurrell attributes this to the still lagging Chinese market. In the meantime, he remains hopeful and expects that China will recover from the current economic slump in the course of the new year and will also buy more dairy.

Below cost price
New Zealand farmers, meanwhile, are not happy with the new price expectations. An average price of NZ $8,00 per kilo of milk solids is not enough to cover the sharply increased costs, their organizations say. This is a risk for the dairy cooperative, even though it has performed excellently in the current year and members can expect a bonus of 81 dollar cents per share on top of the milk price.
Several smaller competitors of Fonterra are looking for extra milk and offer a bonus on top of Fonterra's milk price.

Fight for milk
The leveling off of milk production in New Zealand has created a battle for milk - just like in the Netherlands and Belgium. Processors want to secure their supply base. One private processor has even tried to poach co-operative chairman Peter McBride from Fonterra with a nice transfer offer. He didn't go into it, but the fact that it happened shows how hard there is a fight for milk.

For the year-end, Fonterra expects to make a profit of NZ$1.326 million. That's $854 million more than the previous year. This result is largely the result of better commercial performance, but is also largely the result of the sale of business units, such as the Argentinian subsidiary Soprole and the last Chinese mega farm.