Tuesday, 09 March 2021 06:55

$8 on the cards?

Written by  Sudesh Kissun
Fonterra chief executive Miles Hurrell says the co-op is running the numbers on its forecast farmgate milk price. Fonterra chief executive Miles Hurrell says the co-op is running the numbers on its forecast farmgate milk price.

An $8-plus milk price for Fonterra farmers this season could be on the cards.

Last week’s impressive Global Dairy Trade (GDT) auction results are raising prospects of Fonterra’s milk price passing $8/kgMS for only the second time ever. In 2013-14, Fonterra suppliers received a milk price of $8.40/kgMS.

Westpac senior agri economist Nathan Penny believes there is “a chance” of an $8 milk price.

Penny says Fonterra farmers who follow the GDT auctions closely will be expecting a lift in the co-operative’s forecast milk price.

“Whole milk powder prices have risen by nearly 30% since Fonterra last updated the milk price forecast,” Penny told Rural News.

Fonterra last month lifted its forecast farmgate milk price range to $6.90 – $7.50/kgMS. Westpac has lifted its forecast milk payout to $7.90/kgMS.

Waikato farmer Andrew McGiven says the 21% lift in WMP prices in the latest GDT auction will give Fonterra’s board confidence to lift the milk price range.

He says the GDT result was a huge surprise and “must certainly be due to demand outstripping supply for our products”.

“I guess this result will give the Fonterra board some confidence if they do look at milk price upsides for this season, and may even allow them to extend the range higher into the sevens.  Your guess is as good as mine on this one.”

BNZ senior economist Doug Steel agrees that there is “significant upward pressure” on Fonterra’s forecast range mid-point of $7.20/kgMS and the bank’s forecast of $7.40/kgMS.

However, it’s hard to predict an $8-plus milk price.

The effect of foreign exchange on the second half of the season and the amount of product forward sold by Fonterra need to be taken into account.

Steel says BNZ’s modelling shows that last week’s GDT result would translate into a $9.09/kgMS payout.

“Now, that will be our forecast payout if we sell all our milk at today’s price…how much milk from this season have we sold and how much is left to sell, we don’t know.”

Steel says clearly a 21% jump in WMP prices would mean a lift in the price.

All eyes would now be on Fonterra as it announces the co-op’s half-year results next week.

Fonterra chief executive Miles Hurrell says the co-op is assessing the situation, running the numbers on its forecast farmgate milk price and talking to sales teams on the ground to gauge future demand.

“While GDT results are one key input to the farmgate milk price, there are many other factors we need to consider – including, how far we are through the season, our sales book, foreign exchange and any ongoing impacts from Covid-19.”

Fonterra attributed last week’s extraordinary GDT results to continuing strong demand from China and South East Asia, and a reliable supply chain that had earned the trust of buyers around the globe.

Editor's note: Since this story went to print Fonterra has lifted its forecast milk price range to $7.30 to $7..90/kgMS.

More like this

No fooling around

OPINION: The non-performing China Farms have always been a source of headaches for Fonterra.

China farms finally sold

After years of losses, Fonterra's two wholly owned China farming hubs in Ying and Yutian have been sold.

More grass, more milk

Fonterra collected more milk in February thanks to better pasture growth in most parts of the country.

Tanker drivers roped in for fundraiser

Fonterra's Pahiatua and Longburn based tanker operators have proven the benefits of pulling together - quite literally - by hauling their trucks by hand for charity.

National

Machinery & Products

SIAFD wins punters' plaudits

After celebrating its 70th year last month, it looks like the South Island Agricultural Field Days (SIAFD) has hit its…

Opens up blindspots

Traditionally blind spots caused by large buckets or front mounted loads on wheeled loaders have been a major safety concern.

She's one big feeder

Feeder specialists Hustler has released a maxi-sized multi-feeder aimed at large scale farms in New Zealand and further afield.

Roots out problems

Austrian manufacturer Pöttinger has introduced the new Durastar narrow share for its Synkro and Synkro-T, mounted stubble cultivators.

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Blue murder

OPINION: Your old mate recently read an off-the-wall suggestion, by some boffin, that deliberately staining meat blue will lead to…

Foot in mouth - again!

OPINION: This old mutt reckons Agriculture Minister Damien O'Connor too often suffers from 'foot in mouth' disease.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter