OPINION: Your old mate reckons Fonterra and its dairy farmer shareholders may well be all cock-a-hoop about the prospects of a near $8 payout this year and one north of $8 next year.
The record opening forecast milk price comes on the back of improving global economic environment and strong demand for dairy, relative to supply.
Fonterra chief executive Miles Hurrell says at $8/kgMS payout the co-op would contribute more than $12 billion to the New Zealand economy next season.
Global demand for dairy, especially New Zealand dairy, is continuing to grow.
China is leading the charge as its economy continues to recover strongly, says Hurrell.
“Prompted by COVID-19, people are seeking the health benefits of milk and customers are wanting to secure their supply of New Zealand dairy products and ingredients.
“Growth in global milk supply seems muted and the global supply of whole milk powder is looking constrained.
“Based on these supply and demand dynamics, along with where the NZ dollar is sitting relative to the US dollar, we’re expecting whole milk prices to remain at current levels for the near future.
“As we look out over the next 18 months, there are a number of risks, which is why at this early stage we have this large range on our forecast farmgate milk price.
“Some of the major risks include: COVID 19, which is far from over; the impacts of governments winding back their economic stimulus packages; foreign exchange volatility; changes in the supply and demand patterns that can enter dairy markets when prices are high; and as always, potential impacts of any geopolitical issues around the world.”