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.
The country's second largest milk processor Open Country Dairy will pay its farmer suppliers between $10.30/kgMS and $10.70/kgMS for milk supplied for the September period - milk supplied from June to September.
Open Country doesn't announce an opening forecast milk price; it pays its farmer suppliers in full over four periods every season.
The companys November period milk price is currently forecast to be between $10.20 and $10.60.
Taupo-based Miraka has announced an opening farmgate milk price forecast range of $8.85 to $10.85/kgMS, with a midpoint of $9.85/kgMS. Miraka also offers its suppliers the opportunity to earn up to 20c/kgMS in additional premium payments through its Te Ara Miraka farming excellence programme, now in its tenth year.
When the average Te Ara Miraka premium is included, the total forecast payout for 2025/26 rises to $10.02/kgMS.
The low-carbon dairy processor says its forecast reflects confidence in strong global dairy demand and reinforces Miraka's focus on delivering transparent, reliable value to its suppliers.
"While others in the sector have announced a $10.000 headline price, it's important to understand the full picture," says acting chief executive, Richard Harding. "At Miraka, we believe in being transparent - our $9.85/kgMS midpoint is clearly stated and grounded in market fundamentals."
Harding says that clarity in pricing is critical for on-farm planning and financial confidence.
"We're taking a disciplined approach - optimistic, but grounded."
Last month Fonterra announced a wide forecast range of $8-$11/kgMS for the new season. The co-op settled for amn opening forecast of $10/kgMS.
"Looking at the season ahead, we expect this demand to continue for now, but we acknowledge the ongoing geopolitical uncertainty and the potential for a wider series of outcomes across the season," says Fonterra chief executive Miles Hurrell.
"Therefore, our opening forecast Farmgate Milk Price for the 2025/26 season of $10/kgMS sits within a wide forecast range."
Fonterra is paying farmers an advance rate of $7.50/kgMS for the next four months.
Westpac industry economist Paul Clark notes that global milk supply remains broadly flat despite high milk prices.
Both the European Union and Australia have seen a fall in production, while in New Zealand, output has dropped back to normal levels with dry weather in the North Island affecting pasture growth.
Clark says Westpac is also forecasting $10/kgMS milk price for the 2025-26 season.
"While we expect global production to lift somewhat, prices are still likely to be supported by ongoing growth in demand. We note that futures market pricing for next season currently sits at around $9.90/kgMS," he says.
"That said, it is early in the season and much can change, as evident in the wide $3/kg range seen in Fonterra's opening forecast. Amongst the various uncertainties, it is not clear how demand in China will play out given a lack of transparency on the rebuild of its dairy inventories.
"It's also not clear how tariffs on dairy products into the US might affect trade flows, and what tariffs more generally might mean for global demand and thus dairy prices.
"What also matters is the performance of the exchange rate. While a firmer NZ dollar would ordinarily hurt returns, further broad-based US dollar weakness could see US dollar denominated prices move higher over the coming year."
No Clawback Please
Farmers want Fonterra to communicate any potential changes to the season's milk price early.
Federated Farmers dairy chair Richard McIntyre says Fonterra suppliers will be delighted with the increased advanced payments they are receiving this season - $7.50/kgMS for the first four months of the season.
"But with these high advance rates comes the responsibility for Fonterra to communicate any potential changes to their expected milk price early so that suppliers can alter their budgets ahead of any discretionary spending," he says.
"The wide milk price range and high advance rate creates the risk of a 'clawback' if there is a dramatic shift or a slow reaction from Fonterra. It will be important that suppliers plan their spending around this possibility.
"It's been well over a decade since Fonterra last had to 'clawback' milk payments. Suppliers weren't happy with it then and they wouldn't be now. That said, most would accept some risk of it in return for having the use of their milk income earlier."
