What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
In an email to farmer shareholders last night, Fonterra chairman John Monaghan pointed out that milk production in key markets around the world is up.
This could affect global supply/demand balance that supported “solid” milk price this season.
Fonterra is forecasting a milk price range of $7 to $7.60/kgMS this season. It will announce the opening forecast for the 2020-21 season late May.
In his email, Monaghan tells farmers to be “cautious” with their significant on-farm decisions.
The US, the world’s second largest milk producer, is forecast to lift production by 2%.
Milk supply in Latin America, the UK and EU is also expected to be up on last year, with good growing conditions for UK and EU farmers as they went into their spring peak, notes Monaghan.
“This is likely to disrupt the global supply/demand balance that has supported solid milk prices in the 2019-20 season,” he says.
“We will announce our opening forecast farmgate milk price range for the coming 2020/21 season in late May.
“We 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.
“We encourage you to consider the level of global uncertainty we are all seeing now and out into the future and be cautious with your significant on-farm decisions.”
