Fonterra Co-operative Group Ltd today reduced its 2023/24 season forecast Farmgate Milk Price range from $7.25 – $8.75 per kgMS, with a midpoint of $8.00 per kgMS, to $6.25 – $7.75 per kgMS, with a midpoint of $7.00 per kgMS.
Fonterra CEO Miles Hurrell says the revised forecast Farmgate Milk Price range reflects ongoing reduced import demand for whole milk powder from Greater China.
“When we announced our opening 2023/24 season forecast Farmgate Milk Price in May, we noted it reflected an expectation that China’s import demand for whole milk powder would lift over the medium-term.
“Since then, overall Global Dairy Trade (GDT) whole milk powder prices have fallen by 12%, and China’s share of whole milk powder volumes on GDT events has tracked below average levels.
“This reflects a current surplus of fresh milk in China, resulting in elevated levels of local production of whole milk powder, and reducing near-term whole milk powder import requirements.
“The medium to long term outlook for dairy, in particular New Zealand dairy, looks positive with milk production from key exporting regions flat compared to last year,” says Mr Hurrell. Source: NZX
HighGround Dairy’s Commentary: Fonterra has not narrowed their forecast range, keeping the $1.50/kgMS margin, which can be assumed as a measure of how variable they see the market. Fonterra still expects the market conditions to get better over the longer term, looking at flat milk supply growth flat in key exporting regions. However, this reduction in milk supply may not be enough to move the NZ milk price higher in the current season. This announcement will undoubtedly drive the SGX-NZX milk price futures market lower, adding to the sharp drop in market price following GDT event 337. The Sept ’24 contract finished trading last night at $7.39/kgMS.
