Fonterra Co-operative Group has today reduced its 2023/24 season forecast Farmgate Milk Price range from $6.25 – $7.75 per kgMS, with a midpoint of $7.00 per kgMS, to $6.00 – $7.50 per kgMS with a midpoint of $6.75 per kgMS.
Fonterra CEO Miles Hurrell says Global Dairy Trade (GDT) prices have continued to fall since it revised its Farmgate Milk Price earlier this month, requiring the Co-op to reduce its midpoint by a further 25 cents.
“GDT prices have fallen sharply since we released our opening forecast for the season in May, with the overall index down 16% over that period.
“While our wide forecast range assumed movement in GDT prices, whole milk powder prices fell 10.9% in the most recent trading event requiring us to revise our position again.
“Reduced demand from key importing regions for whole milk powder is continuing to weigh on prices. While indications are demand will start to return over the second half of FY24, we do expect the pace of demand growth to be subdued relative to initial expectations.
“In the meantime, we will continue to respond to market signals and adjust our forecast Farmgate Milk Price to ensure that the impact of current prices and currency movements is transparent.
“This is a challenging time for New Zealand’s dairy farmers and the Co-op is doing all it can to support its farmers,” says Mr Hurrell. Source: NZX
HighGround Opinion:
- This will further impact NZ dairy farmers budgets, but also their sentiment, as cost of production will be much higher than current milk price expectations. However, this earlier-than-normal messaging of declining milk price will be aiding farmers in changing their systems, especially considering that the season is only starting. Weaker milk prices adds more downward pressure on NZ milk production expectations for the current season, now shifting forecasts to be undoubtedly negative for the season ahead.
- This announcement also precedes the coming two GDT auctions in September, where offer volumes have been plumped, and demand is expected to be very weak. There seems little doubt that all dairy prices will continue to slide at the coming two auctions.
