Fonterra facility, Takanini. 30 Herald on Sunday photograph by Michael Craig
ANZ Bank has cut its 2014/15 Fonterra milk price forecast to $4.35kg from a previous forecast of $4.75 -- equating to a $6.9 billion hit to overall dairy revenue if it comes to pass. Fonterra's latest forecast is for a $4.70 a kg milk price.
ANZ said $4.35 would be
"well below" break-even for many dairy farmers. The revenue, loss compared with last year, would represent about 3.1 per cent of GDP, it said.
The bank also anticipates a softer opening price for 2015/16 to be announced in May of around the $5.75/kg mark, down from a previous forecast of $6.50, although it expects a further uplift toward the low $6/kg mark by the end of that season.
ANZ based its new forecast on a more prolonged and modest recovery in dairy prices, combined with a strong New Zealand dollar.
The increase in supply from the major global exporters has been the largest in 8-years, it said.
"The bow wave in milk and inventory will take the market some time to clear," it said.
There was increased competitive pressure from Europe, it said.
Chinese domestic milk supply appears to have increased and more wholemilk powder is likely to have been manufactured. Seasonally, import demand isn't expected to pick-up until the back end of 2015.
