Fonterra maintains 2019/2020 milk price forecast despite risks in global dairy market

September 6, 2019

BY Alexander Kalis

By Newshub NZ

Fonterra has maintained its current forecast farmgate milk price for the season, however has flagged some risks in the international dairy market.

In a statement, the dairy co-op’s Chairman, John Monaghan said it had reviewed the 2019/2020 forecast in line with obligations under the Dairy Industry Restructuring Act (DIRA).

“We have maintained the current forecast range of $6.25 to $7.25 per kgMS, and the Advance Rate schedule, which is set off $6.75 per kgMS,” he said.

“It is still early in the season with around 2 percent of our forecast full season milk volume collected to date, so we are retaining a range of +/- 50c per kgMS,” said Monaghan.

The range would narrow as the season progresses and there was greater certainty on production and sales.

Monaghan said while the global dairy market remained largely in balance, it was not without some risk.

“We are keeping a close eye on international trade tensions and geopolitical risks.”

The weakening Chinese currency means less consumer purchasing power for USD-priced dairy products like ours.”

There was also continuing volatility in the price of dairy fat.

“On the other side, we have seen good Whole Milk Powder (WMP) demand. Global milk supply growth is slowing and international WMP production expectations are falling.”

The board has increased its 2019/2020 forecast organic milk price, citing good progress in contracting this season’s milk, coupled with continuing strong demand for ingredient products.

The forecast organic milk price range has increased to $8.25 – $9.25 with the Organic Advance Rate set off a mid-point of $8.75/kgMS.

This is up from a previous forecast mid-point of $8.50.

The final 2018/19 farmgate milk prices will be announced as part of Fonterra’s annual results on 12 September.