Mata dairy farmer Jarrod Halse is being conservative about the future outlook despite good forecast milk prices.
Photo / Michael Cunningham
Mata dairy farmer Jarrod Halse is being conservative about the future outlook despite good forecast milk prices.
Photo / Michael Cunningham
While the highest milk price payout in history is on the cards for Northland dairy farmers, rising farm costs and continued global uncertainty are affecting the future outlook.
Fonterra will announce the final milk payout price for the 2021/22 season in September and the dairy giant has at this stagemaintained a forecast range of between $9.10 and $9.50 per kg of milk solids.
"At a midpoint of $9.30 per kgMS, this would be the highest forecast milk price in the co-op's history and would see us contribute almost $14 billion to the New Zealand economy through milk price payments," Fonterra chief executive Miles Hurrell said.
A payout of $9.30 per kg/MS will earn Northland dairy farmers $837 million while $9 will rake in $810m, based on about 90 million kg/MS that they supply to Fonterra each year.
The highest payout they have received was $8.50 per kg/MS for the 2013/14 season, which was worth $765m.
Mata dairy farmer Jarrod Halse said while the forecast price was good news, farmers were being "very conservative" at the moment as high fuel, fertiliser and labour costs eat into their profits.
Feed costs globally went up 43 per cent at the end of last year compared with the previous season.
"The prices in the last three years have been good but we still have concerns looking at things on the global market. We're not guaranteed the forecast price, which could change," Halse said.
"Debt servicing would be our top priority, especially since interest rates have been going up. Farm maintenance also needs attention but we'll have to wait and see." Halse milks 360 cows.
Luke Owd worked as a fitter in Australian mines for about 10 years before switching to dairy farming in Ruawai around mid-2016.
He said two to three months ago farmers were looking at a payout of $10 per kg/MS, given the movement in global dairy prices, but the forecast prices have come down since the start of the Russia/Ukraine war.
"Also, milk production in Europe is peaking at the moment so prices will likely change. New Zealand dairy has a long future but at what scale does it change?"
Fonterra has so far maintained a final payout of more than $9 per kg of milk solids.
Photo / NZME
Owd is milking 520 cows between one farm he owns and another he leases in Ruawai.
Fonterra last week announced an opening forecast of between $8.25 and $9.75 per kgMS, with a midpoint range of $9, for the 2022/23 season.
Federated Farmers Northland acting dairy chairman Matt Long said the opening forecast range for this season was a big step down, given milk prices globally were trading at $10.25 to $10.30 six weeks ago on the New Zealand Exchange.
"It's a bit of a concern when prices go down so quickly. A $9 payout is good but farm expenses have also gone up and we are still very much dependant on the Chinese market," he said.
Fonterra warned while the long-term outlook for dairy remained positive, farmers were operating in an increasingly volatile global environment and were managing a wider range of risks than usual.
They include the potential for further impacts from Covid, financial markets and foreign exchange volatility, global inflationary pressures, a tightening labour market, increasing interest rates, geopolitical events and possible impact on demand from higher dairy prices.
For the nine months ending April 30, 2022, Fonterra's sales volumes were down as a result of lower milk collections and the timing of sales due to short-term impacts on demand including the lockdowns in China, the economic crisis in Sri Lanka and the Russia-Ukraine conflict.
"As an exporter, many of the markets we operate in have been prone to sudden shocks, which can impact what we sell, where we sell it and when. Right now we're feeling the impact of multiple events across multiple markets," Hurrell said.
Growth from key milk-producing regions was expected to remain constrained as high feed, fertiliser and energy costs continue to impact production volumes, he said.
