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.
He believes the sector will have a wonderful opportunity to reset itself.
Speaking last week on a webinar, organised by the Rural Support Trust, the Waikato agribusiness leader noted that agriculture has always been the backbone of the economy.
“We have been the driving the economy; the economy cannot do without us,” he says.
“I think that’s lost and a little forgotten over the last five to ten years.
“Post COVID-19 will provide a wonderful opportunity to come to the fore again.”
However, he warned farmers there will be challenges from a looming global recession, which will result in high unemployment and a drop in income. This will cause realignment in global demand and supply of milk.
Van der Heyden says no one is sure how things will play out in the next 12 months.
“We are in a period of uncertainty: no one actually knows what’s going to happen going forward.”
Commenting on the forecast milk price for 2020-21, van der Heyden noted some banks were predicting between $5.60 and $5.75/kgMS.
Van der Heyden, who is chairman of Rabobank Australia, says those numbers “feel conservative”.
“I’m still hoping we will have a six in front of the payout.”
His message to farmers is to budget conservatively.
“I feel this is a time for many of us to be conservative.”
While uncertain about the next 12 months, van der Heyden says he remains positive about dairying.
“I think we are going into a recession. There will be high unemployment and incomes will be down, but fundamentals of food will come to the fore.
“Milk price will depend [on] the fundamentals of supply and demand.”
He also urged farmers to maintain a strong relationship with their bankers.
“Banks don’t like surprises: stay close to your budgets and keep the banks informed”.
Van der Heyden served as Fonterra chairman between 2002 and 2012. He has farming interests in NZ and Chile.
