Fonterra shaves 50c off forecast milk price
Fonterra has dropped its forecast milk price mid-point by 50c as a surge in global milk production is putting downward pressure on commodity prices.
In its monthly global dairy update, the co-op notes that the US, Argentina and Uruguay are experiencing a decrease in volumes. However, European exports continue to soar.
New Zealand exports also continued to grow, increasing 29% on a year-on-year basis for the month of August. The most significant change came from whole milk powder (WMP) exports, up 28% in August 2014 compared to the same month last year.
Australian exports increased 13% on a year-on-year basis for the month of August. This increase in exports was a result of skim milk powder (SMP) increasing 58% and fluid milk up 43%. By contrast, WMP decreased 29% and butter 19%.
Fonterra says production growth from the EU continues to impact export growth with exports increasing 12% on a year-on-year basis for the month of July. Exports are now up 14% year-to-date to July 2014 compared to the same period last year.
The export products driving this increase are butter up 52%, SMP up 47% and fluid and fresh milk up 25%.
US exports decreased for the second consecutive month, down 10.2% on a year-on-year basis for the month of August. This is the second year-on-year decrease since 2012. Contributing factors to this decline are high domestic market prices and low global commodity prices.
The production decrease in Argentina and Uruguay continues to impact exports which decreased by 22% on a year-on-year basis for the month of August. Factors that may be influencing reduced exports include low production levels, reduced demand from Brazil and export restrictions in Argentina.
Last season's record dairy prices spurred milk production in most key exporting countries. Milk prices have halved this year.
