Tuesday, 08 June 2021 09:55

Organic milk price dropped

Written by  Sudesh Kissun
Fonterra says organic milk supply globally remains in surplus and this is negatively impacting global prices. Fonterra says organic milk supply globally remains in surplus and this is negatively impacting global prices.

Fonterra's small group of organic farmers are facing a drop in milk price after a record $10.26/kgMS payout last year.

The co-operative's 70 organic suppliers have been told to expect a $9 payout for the 2020-21 season that has just ended.</p.

In an email, Fonterra chief executive Miles Hurrell told farmers that globally, consumer demand for natural, healthy, sustainable products continues to drive growth in organic dairy.

"However, despite the increasing demand, organic milk supply globally remains in surplus and this is negatively impacting global prices," he says.

In addition, Covid-19 continues to impact some Fonterra customers.

Hurrell says while Fonterra can still get products to these customers, the disruption they are experiencing in their supply chains means the co-operative is seeing less demand from them for organic ingredients.

"This is particularly the case for our Australian based customers that export to China.

"As they put their energy into keeping their businesses running, they also have a reduced appetite to drive new product development."

Hurrell says these supply and demand dynamics are flowing through to its opening 2021-22 forecast organic milk price - $8.10 - $9.10/kgMS range, with a midpoint of $8.60/kgMS.

Fonterra's organic payout for 2020-21 has narrowed to $8.90 - $9.10/kgMS with a midpoint of $9/kgMS. It had opened the 2020-21 season with a $8.50-$9/kgMS range.

All of Fonterra's organic ingredients and consumer products are made in the North Island from North Island supply.

Its key sales regions are the US, Australa, South Korea, New Zealand, China & SEA, India, South America, & Taiwan.

Fonterra's organic $10.19/kgMS payout for organic milk last year is a record price for cow milk in New Zealand.

Last month, Fonterra announced an opening forecast farmgate conventional milk price range og $7.25-$8.75/kgMS - a record opening forecast.

Hurrell says that the improving global economic environment and strong demand for dairy, relative to supply, are sitting behind the co-op's $8 midpoint.

Global demand for dairy, especially New Zealand dairy, is continuing to grow. China is leading the charge as its economy continues to recover strongly.

Hurrell says, prompted by Covid-19, people are seeking the health benefits of milk and customers want to secure their supply of New Zealanddairy products and ingredients.

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter