Fonterra cuts milk price forecast to $9.10 to $9.50/kg range

Fonterra says a number of events have resulted in short-term impacts on global demand for dairy products. Photo / File

Fonterra has cut this season's forecast farmgate milk price range to $9.10 to $9.50 per kg of milksolids from a previous forecast of $9.30 to $9.90 per kg because of market disruption abroad.

This reduces the midpoint of the range, which farmers are paid off, to $9.30 from $9.60/kg.

The change was due to a number of events which have resulted in short-term impacts on global demand for dairy products – in particular, the Covid-19 lockdowns in China, the economic crisis in Sri Lanka and the Russia-Ukraine war.

"While the long-term outlook for dairy remains positive, and we expect global demand and supply to be more balanced over the rest of the year, we have seen these short-term impacts flow through into pricing on the Global Dairy Trade (GDT) platform," chief executive Miles Hurrell said in a statement.

The average prices for whole milk powder, a key driver of the milk price, have decreased by 18 per cent over the past four GDT events.

"As an exporter to 140 countries we deal with these kinds of global events all the time, but right now we're seeing the impact of multiple events.

"Coupled with inflationary pressures, it's not surprising to see buyers being cautious," he said.

At a midpoint of $9.30 per kg, this would continue to be the highest forecast Farmgate Milk Price in the co-op's history.

"Looking out to the rest of the year, global milk production is expected to remain constrained as high feed, fertiliser and energy costs continue to impact production in the Northern Hemisphere, and we expect demand to recover as the short-term impacts begin to resolve," he said.

While there is still a high level of uncertainty in global markets, most of Fonterra's milk has been contracted for the season, the co-op said.

- Staff reporter