What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
With just over two months left in the 2023-24 season and bulk of the season’s products prices, Keall expects little change to Fonterra’s mid-point of $7.80/kgMS. Releasing its half-year results yesterday, Fonterra narrowed its price range to $7.50-$8.10/kgMS but the mid-point remains unchanged.
Keall says Fonterra’s tweak reflects that we are increasingly close to the end of the season, and both upside and downside risks have dissipated.
“Mechanically, the bulk of the season’s product has been priced and the co-op has little further hedging to do.”
ASB’s forecast for the season has been sitting at around $8/kgMS since the beginning of the year, when Fonterra’s midpoint was $7.50/kgMS.
But Keall accepts that it looks like prices might not quite manage to hit that point, having run into resistance at the past couple of dairy auctions. That includes this week, where the overall Global Dairy Trade (GDT) index eased 2.8% and whole milk powder fell 4.2%.
Keall isn’t surprised to see WMP prices pare back some of their recent gains.
“We’ve long noted Chinese demand remains fairly muted and that we probably couldn’t expect South East Asian & Middle Eastern buyers to offset that forever. But we had thought prices might sustain these levels for long enough for the seasons price to hit the $8/kgMS.”
Keall says attention is now largely focused on the price dairy farmers can expect next season.
ASB is forecasting an opening forecast milk price of $8.30/kgMS. Fonterra is yet to come out with an opening forecast milk price for the next season.
