Fonterra has trimmed its milk price forecast amid abundant global dairy supply, which continues to pressure international prices downward.
The cooperative has narrowed its Farmgate Milk Price forecast range from $9-$10 per kg of milk solids down to $8.50-$9.50 per kg.
The midpoint forecast has been reduced from $9.50 to $9 per kg of milk solids.
“With half the season still to complete, we continue to experience strong milk flows both in New Zealand and globally, particularly out of the United States and Europe, and this continues to put downward pressure on global commodity prices,” Fonterra chief executive Miles Hurrell said.
This announcement follows days after the latest Global Dairy Trade auction, where prices dropped for the ninth straight event.
“Combined with a rising New Zealand dollar since the last milk price update in November, we are required to further adjust the forecast range for the season and lower our midpoint,” Hurrell said.
He highlighted that Fonterra opened the season with a broad forecast range of $8-$11 per kg, and the updated $9 midpoint remains within it.
“We remain committed to maximising returns for farmer shareholders through both the Farmgate Milk Price and earnings, strong customer relationships and a firm focus on margins, product mix, and operational efficiencies,” Hurrell said.
ANZ agricultural economist Matt Dilly stated that global milk production has surpassed expectations, driven primarily by Europe and the United States. He said he wouldn’t be surprised by additional milk price cuts.
“It is unusual for prices to drop at this many auctions consecutively, so we could see a small bounce back, but the writing is on the wall that we’re in a bearish market for dairy at the moment,” Dilly added.