increase font size
John Monaghan.
Dairy farmers are being told to brace for a big drop in milk payout next season.
A likely global recession, triggered by Covid-19, will impact demand and could drop the payout by up to $2/kgMS compared to the current season.
Fonterra’s 2019-20 payout range is $7 to $7.60/kgMS; its 2020-21 opening forecast will be announced early June.
Rural bankers are predicting a wide-ranging opening forecast next season; Rabobank $5.60/kgMS, Westpac $6.30/kgMS and ASB $6.50/kgMS.
However, ASB senior rural economist Nathan Penny is warning farmers to plan for “a sub-$6” payout.
“For now, we retain our $6.50/kgMS forecast, but note the increasing downside risks and suggest that farmers start contingency planning for the possibility of a sub-$6.00/kg milk price for the 2020/21 season,” he says.
Rabobank senior dairy analyst Emma Higgins says its forecast is based on global supply and demand fundamentals and factors in significant market uncertainty.
“Given the rapidly-changing operating environment due to Covid-19, the forecast settings are incredibly complicated and there are a number of upside and downside risks that could impact the bank’s views on the global dairy markets over the course of our forecast timeframe,” she says.
Outgoing Waikato Federated Farmers president Andrew McGiven agrees that there is lot of uncertainty about next season’s payout.
“Indications from the economists are to expect a pull back on milk price, but the great unknown is by how much,” he told Rural News.
“The ultimate effect on the world economies is still very hazy and with uncertainty comes volatility, however I think we should all expect that a lot of people’s disposable income will be severely eroded by what is happening and this will have some sort of flow-on effect.
“Although food is a necessity, if the number of retailers and hospitality outlets reduce, then the market and demand for dairy and other food staples will be less than projected supply in the short term and this could have an adverse effect on price.”
Fonterra farmers have enjoyed farmgate milk price of over $6 for the past four seasons, with this season’s price tipped to be peak at $7.30/kgMS.
However, in an email to farmers recently, Fonterra chairman John Monaghan alluded to European and US farmers pouring milk down the drain due to the impact of COVID-19 on their supply chains.
Monaghan noted that milk production was up in key regions: the US, Latin America, the UK and EU.
“This is likely to disrupt the global supply/demand balance that has supported solid milk prices in the 2019-20 season,” he warns.
Monaghan says when announcing its opening forecast next month, Fonterra “will be considering the high levels of uncertainty that we are seeing across the world, stronger supply signals from key dairy regions, and the NZ/US exchange rate as we forecast what prices could be more than a year from now”.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.
OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.
Fonterra has delivered a fifth straight year of record organic milk price for farmer suppliers.
Fonterra says favourable weather conditions supporting pasture growth is boosting milk production.
Like many manufacturers around the world, European agricultural machinery and tractor manufacturers are currently operating in a difficult market environment. But they are heading to the world’s largest agricultural machinery event in Hanover next month with a degree of cautious optimism.
Established in 2021, the John Deere Technician of the Year Awards champion the important contribution parts and service technicians make to the Australian and New Zealand agriculture, construction and forestry industries.
Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.
New Zealand is closer to eradicating bovine TB than ever before, but possums remain a threat, says Beef + Lamb New Zealand.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
The ACT Party says media reports that global dairy giant Nestle has withdrawn from the Dairy Methane Action Alliance shows why New Zealand needs to rethink its approach to climate.
OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.
OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…
