News Fonterra
Fonterra lowers forecast second time in month
The New Zealand dairy giant Fonterra lowers the milk price forecast for the new production season for the second time in a month. With a smaller step, but the prospect of improvement seems even further away.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
CEO Miles Hurrell expects that the all-important demand 'from key demand areas' (say: China) will not pick up again until the second half of 2024. Until then, he believes, things will remain difficult on the global market.
On August 4, Fonterra lowered its price forecast for the fresh production season from NZ $8.00 to NZ $7.00 per kilo of milk solids. Two weeks later, the forecast is lowered by 25 cents again.
To justify Fonterra's latest choice, Hurrel refers to the sharply fallen index of the internet auction GDT and the also sharply fallen price for whole milk powder at the last auction. "Since the first milk price forecast at the end of May, the GDT index has fallen by 16% and during the last auction round of the GDT, the index price for whole milk powder fell by 10,9%." According to Hurrell, these are signals that cannot be ignored.
Year of reductions
Whether the New Zealand dairy industry will respond to this news with lower production remains to be seen. It is clear that margins in dairy farming are becoming increasingly tight, especially because New Zealand is also increasingly subject to environmental and sustainability requirements.
Last September, Fonterra's milk price forecast was at the top, with an expected average price of NZ$9,50 per kilo of milk solids. Incrementally, that expectation has been lowered to NZ$8,20.