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.
"At this point last year Fonterra's half-year profit was $293 million, but in 2012, that's grown to $346 million," says Willy Leferink, Federated Farmers Dairy chairperson. "The big question for farmer-shareholders is whether the year's back end will remain as strong."
Declining results on Fonterra's GlobalDairyTrade auction platform back up opinion that soft commodities are undergoing a price correction, while the kiwi is high against the US dollar reducing farmgate returns even further.
"If the high dollar continues, it will start to cause problems," says Leferink. He says farmers should base their budgets on less than $6 per kilogram of milksolids. Anything more is "extremely brave".
