Fonterra has reduced its milk prices as demand has decreased.
Fonterra has reduced its milk prices due to a drop in demand.
The farmer-owned cooperative reduced and narrowed its forecast Farmgate Milk Price range for the 2022/23 season from $8.50 to $9.50 per kilogramme of milk solids (kgMS), with a midpoint of $9, to $8.20 to $8.80, with a midpoint of $8.50.
At the same time, it revised its forecast milk collections for the 2022/23 season to 1465 million kgMS, down from 1480 million kgMS previously.
According to Fonterra CEO Miles Hurrell, the revised forecast Farmgate Milk Price range reflects softened demand at a time of balanced supply.
“Demand for whole milk powder has been soft, particularly from Greater China, with prices down around 5% since the beginning of December.”
While Fonterra was encouraged by recent increased Chinese purchasing behaviour, he said it was too early to tell how this would affect the rest of the season.
It also maintained its cautious stance in light of the global economic growth outlook.
When purchasing milk from farmers, Fonterra considers the fat and protein levels.
“In terms of milk production, while Fonterra’s season collections are up from this time last year, cyclone Gabrielle and dry conditions in the South Island have impacted the co-full op’s season expectations.”
Milk supply from key exporting regions was balanced globally.
Europe and America produced more than last year, but this was partially offset by lower collections in New Zealand, Australia, and Latin America.
“The medium to long-term outlook for dairy, in particular New Zealand dairy, looks positive. “We are evaluating our position for next season and will provide an opening forecast in May,” Hurrell explained.
