Fonterra pays NZ farmers record milk price
Fonterra New Zealand has lifted Kiwi farmers’ milk price to a new record. And Aussie farmers are asking what it means for them.
Kiwi dairy giant Fonterra has lifted the 2021-22 forecast milk price paid to its New Zealand farmers by 50 cents to a new mid-point of NZD $9.20 per kilogram milk solids.
The move is set to capture the attention of Australian farmers keen to know if Fonterra’s Australian arm will follow its parent company’s lead.
As it stands southeast Australian dairy farmers are being paid about $7-$7.30/kgMS in Australian dollars, equal to about NZD$7.40-$7.70.
A Fonterra Australia spokeswoman said at this stage the company was sticking to its current schedule and would not be reviewing Australian farmgate milk prices until next month.
The Weekly Times is trying to contact other local milk processors for comment.
Fonterra NZ’s decision follows a tightening of global supply dairy supplies, which lifted last week’s Global Dairy Trade index to 1397, a level not seen since March 2014.
The NZ Fonterra Co-operative Group issued a statement today declaring it had lifted this season’s forecast farmgate milk price range from NZD $8.40-$9.00/kgMS to NZD $8.90-$9.50 per kgMS, up from NZD $8.40-$9.00 per kgMS.
It’s the highest price Fonterra has ever paid farmers, since it was formed in October 2001.
NZ Fonterra chief executive Miles Hurrell said the price lift was “the result of consistent demand for dairy at a time of constrained global milk supply.
“In general, demand globally remains strong – although, we are seeing this vary across our geographic spread.
“Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs.
“It’s a similar supply picture in New Zealand. Earlier this month we reduced our forecast milk collections for 2021-22 from 1525 million kgMS to 1500m kgMS due to varied weather and challenging growing conditions.
“While the higher forecast Farmgate Milk Price does put pressure on our margins in our consumer and foodservice businesses, prices in our ingredients business are favourable for milk price and earnings at this stage. As a result, we remain comfortable with our current 2021/22 earnings guidance of 25-35 cents per share.”
Mr Hurrell said there are a number of factors the Co-op is keeping a close eye on, including growing inflationary pressures impacting on operational costs, the increased potential for volatility as a result of high dairy prices and economic disruptions from COVID-19, particularly as governments respond to the .rapid spread of the Omicron variant.
GDT results from last week show butter prices have risen from US$4458 in July last year to US$6158 last week.
Whole milk powder have also risen by 5.6 per cent in the two weeks leading up to last Tuesday’s auction, while skim milk powder jumped 5 per cent.