Fonterra puts the heat on rivals

Last month Fonterra lifted its 2021-22 forecast farmgate milk price range to $8.90 - $9.50/kgMS, increasing the midpoint of the range, which farmers are paid off, by 50 cents to $9.20/kgMS. The previous record milk price of $8.40/kgMS was set in the 2013-14 season.

Langford says this is a strong result in uncertain times.

"It not only drives the milk price for Fonterra farmers but will also put heat on other processors to match this performance," he told Dairy News.

"It will be interesting to see how other processors react to this announcement."

Last week Synlait lifted its forecast base milk price for the season by $1.25 to $9.25/kgMS.

The country's second largest milk processor Open Country Dairy paid its suppliers $9.01/kgMS in full for milk supplied in November and December.

Langford says farmers will welcome the lift in the forecast milk price.

"Any payout increase is welcomed by farmers, especially in the latter half of the season when there is more surety in the forecast," he says.

However, some shine will be taken off the rising farm working expenses.

"While this payout is welcomed by farmers, some of the shine has been taken off the on-farm profit by the increased costs of most products and services.

"There is also an upward trend in interest rates and most farmers are remembering the significant drop after the last high payout, so will be putting a bit in their back pocket in case that happens again."

Langford praised Fonterra's performance, especially during the pandemic.

"Years of work around food safety standards, product lines and logistics have paid off in these uncertain times.

"This has helped farmers feel proud of what they do each morning and the backbone they are providing for the NZ economy."