Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
The co-op has increased the midpoint of its forecast range, which farmers are paid off, by 20c to $7/kgMS. This follows a 40c lift in October.
Fonterra chief executive Miles Hurrell says as a result of strong demand for New Zealand dairy, the co-op has narrowed and lifted the bottom end of the forecast farmgate milk price range from $6.30 - $7.30/kgMS to $6.70 - $7.30/kgMS.
“This means the midpoint of the range, which farmers are paid off, has increased to $7/kgMS,” he says.
“China is continuing to recover well from COVID-19 and this is reflected in recent Global Dairy Trade (GDT) auctions with strong demand from Chinese buyers, especially for Whole Milk Powder, which is a key driver of the milk price.
“The impact of COVID-19 continues to play out globally, and we continue to have a watchful eye on the increasing Northern Hemisphere milk production and New Zealand dollar.
“However, we have contracted a good proportion of our sales book for this time of the season, which has given us the confidence to narrow and lift the bottom end of the forecast Farmgate Milk Price range.
“Our forecasts would see the co-op contribute around NZD $10.5 billion to the New Zealand economy this year.”
