Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
Fonterra now believes the milk price could hit double digits for the first time, with the top of its forecast range touching $10. The co-op board met on Sunday evening and raised the midpoint of the 2024-25 season forecast farmgate milk price from $9/kgMS to $9.50/kgMS. The co-operative also announced a narrowing of the forecast range from $8.25 - $9.75/kgMS to $9 - $10/kgMS.
It says this reflects the fact that more of the FY25 sales book has been contracted since the last forecast farmgate milk price update in September.
CEO Miles Hurrell says the improved outlook has largely been driven by strong demand for reference commodity products, which has helped to push prices up in recent Global Dairy Trade auctions.
Fonterra’s highest milk price to date is $9.30/kgMS, paid out in 2021-22 season. A fully shared up farmer received a dividend of 20c, taking the total payout to $9.50.
Fonterra notes that demand for whole milk and skim milk powder is strong in China.
“This demand has been seen out of China, where there are indications that domestic production is below expectations, and also in Africa, the Middle East and Southeast Asia,” says Hurrell.
“Looking ahead, we’ll closely monitor any factors that could have an impact on supply and demand. This would include any significant change to milk supply in New Zealand over the second part of the season which could lead to pressure on global milk prices.
“We’ll also continue to utilise our scale and flexibility when it comes to optimising our product mix, including putting more of our farmers’ milk into the higher returning products to capture the value from every drop.”
