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Fonterra chief executive Miles Hurrell.
Fonterra has responded to recent jumps in global dairy prices and lower domestic milk collection by lifting its forecast milk price mid-point by 50c/kgMS.
The co-operative’s new forecast farmgate milk price range for this season is $6.50 to $8/kgMS.
Fonterra chief executive Miles Hurrell says the improved outlook reflects both supply and demand dynamics.
“Here in New Zealand we’re forecasting collections to be slightly below last season, while aggregate milk growth in key export countries is expected to be below average for FY24,” he says.
“The El Niño weather pattern may have further impacts on supply, and this could be driving recent buyer sentiment.
“On the demand side, we have seen increases in recent Global Dairy Trade events. While this has been encouraging, it is not yet clear whether the stronger demand from China will be sustained. For other key regions, customers remain relatively cautious in terms of their forward purchases.
“It’s still early days in terms of the proportion of our FY24 sales book that we’ve contracted, so we still face significant exposure to volatility in commodity prices.”
Dairy prices on GDT rose for the third consecutive time last week with flagship whole milk powder price rising nearly 5% in the last auction.
Hurrell says exchange rate volatility is another factor to keep in mind.
“Our foreign exchange hedging strategy is designed to help lessen the impact of this, and also supports a higher Advance Rate level than would be possible without hedging.
“We’ll continue to let our farmers and the market know as soon as we can when we think things have materially shifted,” says Hurrell.
OPINION: There is zero chance that someone who joined Fonterra as a lobbyist, then served as a general manager of Fonterra's nutrient management programme, and sat on the board of Export NZ, a division of lobbyist group Business New Zealand, doesn't understand that local butter (and milk and cheese) prices are set by the international commodity price.
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