Fonterra lowers its forecast milk price again

New Zealand dairy giant Fonterra has lowered its forecast milk price for the 2018/19 milking season for the second time in a matter of months. The farmer co-op announced on Tuesday that it was lowering its forecast milk price for 2018/19 from $6.75kg of milk solids (MS) to a range of $6.50kg/MS to $6.25kg/MS.

In an Irish context, this means Fonterra is cutting between 1c/litre and 1.5c/litre from its forecast milk price of 26.1c/litre to a new range of 25.1c/litre to 24.6c/litre. This latest downgrade by Fonterra of its forecast milk price follows from the 1c/litre cut announced in August.

This means between 2c and 2.5c has now been cut from Fonterra’s original milk price forecast for the 2018/19 milking season of 27.1c/litre, which was set in June. For Fonterra’s dairy farmer suppliers, this week’s cut will be hard to take. Two cuts in the milk price in less than two months sends a particularly negative signal.

Fonterra’s newly appointed chief executive Miles Hurrell blamed a stronger global supply picture for the cut in milk price as well as the recent poor returns from GDT auctions.

“We are still seeing strong production coming from Europe, US and Argentina,” said Hurrell.

“At recent GDT events, prices for all products that make up the milk price have fallen. Demand for WMP, in particular, continues to grow in China, and it remains strong across southeast Asia, but it simply isn’t matching current levels of supply,” he added.