“With half the season still to complete, we continue to experience strong milk flows both in New Zealand and globally, particularly out of the United States and Europe, and this continues to put downward pressure on global commodity prices.
“Combined with a rising New Zealand dollar since the last milk price update in November, we are required to further adjust the forecast range for the season and lower our midpoint.”
Hurrell said the season started with a wide forecast range of $8.00-$11.00/kg, and the new midpoint of $9.00/kg remained within that range.
The move follows another poor Global Dairy Trade (GDT) auction result this week, which prompted further weakness in dairy futures prices.
On Wednesday, ASB Bank lowered its milk price forecast for the current season to $9.20/kg.
The two most important products that “inform” Fonterra’s forecast – whole milk powder and skim milk powder – fell by 5.7% and 2.1% respectively at the GDT auction.
“The pace and magnitude of the price declines across all products over December has been greater than our already pessimistic forecasts that we published in November,” ASB said.
The overall GDT price index is now 12.6% below a year ago and below its 10-year average, with milk powder prices driving the longer-term weakness.
Whole milk powder prices are about 3% below the 10-year average, while skim milk prices are 8% below.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
- Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter – your essential weekly round-up of all the business news you need.
