Fonterra lifts forecast milk price

Fonterra has increased its forecast milk price for the current season to $5.90-$6.90 per kg of milk solids.

The previous range was $5.40 to $6.90/kg.

The co-op also said the mid-point of the forecast for the 2019/20 season, which has just passed, fell to $7.15/kg from $7.20/kg, reflecting a stronger New Zealand dollar.

The final price for that season will be made in September.

The mid-point for the current 2020/21 season improved to $6.40/kg from $6.15/kg, based on strong demand from China.

That forecast compares with Dairy NZ’s estimate of break-even for the average farmer of $5.80 to $5.90/kg.

Commenting on the 2020/21 forecast, chairman John Monaghan said after an initial shock due to Covid-19, dairy consumption in China was recovering.

“We’re seeing customers ramp up promotional activity as they look to catch up on the sales losses incurred over lockdown,” he said.

“Elsewhere, the EU and US governments’ support measures for farmers are holding up milk production and dairy commodity prices despite the disruption they have experienced so far from Covid-19.

“While we expect these support measures to end at some point, it is likely they will continue through the peak of the New Zealand season.”

There was still a high level of uncertainty but the risks would lessen, supporting the decision to lift the bottom end of the price range, he said.

Fonterra said farmers should continue to budget with caution.

At the last Global Dairy Trade auction on July 8, strong demand for whole milk powder drove the GDT price index up by 8.3 per cent — its biggest lift since November 2016 and the fourth consecutive gain.

Whole milk powder prices — which have the biggest bearing on Fonterra’s farmgate milk price — leapt 14 per cent to US$3208 a tonne and back to where they were in late January this year.

After a sharp shift down to US57c in March, the New Zealand dollar has recovered ground, closing yesterday at US65.42c.