Demand prompts rise in milk payout
AUCKLAND: Fonterra says it has increased the midpoint of its forecast farmgate milk price range to $6.80 per kg of milk solids, up from $6.40, driven by greater demand from China.
The cooperative left itself plenty of wriggle room by retaining its current plus or minus 50c a kg range but, at $6.80, the price would be one of the highest paid by the cooperative, adding $10 billion to regional New Zealand.
Chief executive Miles Hurrell said that despite the initial impact of Covid19, demand for dairy in China had recovered quickly.
In particular, demand for whole milk powder — a big driver of milk price — had been stronger than expected.
‘‘While it is still early in the season, dairy prices have improved from the levels we saw on Global Dairy Trade [GDT] through the first wave of Covid19 and demand for milk powders has proved resilient,’’ he said in a statement.
‘‘We have seen this demand reflected in GDT auctions, with prices trending upwards in recent events and this is supporting our decision to lift the range and its midpoint, which farmers are paid off.’’
Mr Hurrell said the coop was keeping a close eye on various factors, which was why it was retaining a wide forecast range of $6.30$7.30 per kg of milk solids.
‘‘It is still relatively early in the season and a lot can change.’’
‘‘For example, we could experience volatility with exchange rates, milk supply from the EU and US is increasing and there continues to be uncertainty around how a potential risk from further waves of Covid19 and a global economic slowdown could impact demand,’’ he said.
Risks remained, which meant farmers needed to be cautious in their decisionmaking. — The New Zealand Herald