Fonterra slashes forecast milk price, again
Fonterra has slashed another 50c off its milk price forecast as global milk flows shows no sign of easing.
It notes that in the year December 2015 to December 2016, infant formula milk exports from NZ increased by a massive 65% – well above the total world export rise of 44%. Unsurprisingly, much of the demand is led by China where consumers prefer imported products to domestic. And there is demand in China for NZ UHT milk and cream.
The report says NZ’s dependence on the Chinese market is risky, but that the strong consumer demand for safe, high quality products should see growth opportunities continue for the foreseeable future.
Revenue from dairy products for the next five years is expected to rise from the present $14.6 billion to $18.2b by 2021, much of this attributed to rises in WMP, butter, cheese and infant formula.
Jarrard Mair, MPI director of sector policy, says the WMP price is expected to hold the $3000/tonne mark.
And there is lots of good news for the dairy sector in the “exciting stuff coming through from some of the big PGPs”.
“The news has a good solid base and we are not seeing any big fluctuations coming; but we are seeing exciting high-end high-quality food opportunities due to investment in the dairy industry over the past six years. We are seeing great value-add products coming from all the dairy companies.”
MPI says cow numbers rose by 2.9% in the 2016-17 season despite a near-record cull in 2016, but cow numbers this season are predicted to remain static at about 5.9 million.
Milk solids production for the coming season is predicted to be up 2% assuming normal weather, and to increase by 1% over the next five years to 2021.
While MPI waxes lyrical about opportunities, it also warns that NZ has to get a better understanding of the dynamics of new markets. It notes in particular the rise and rise of e-commerce in China and the role and influence of the online platform Alibaba on traditional retailing.
