Fonterra Co-operative Group Ltd has raised the 2023 to 2024 season forecast Farmgate Milk Price range to $6.50 - $8.00 per kgMS, with a new midpoint of $7.25 per kgMS, up 50 cents.
Fonterra CEO Miles Hurrell's improved outlook reflected both supply and demand dynamics.
“Here in New Zealand, we’re forecasting collections to be slightly below last season, while aggregate milk growth in key export countries is expected to be below average for FY24,” said Hurrell.
He continued that the El Niño weather pattern may further impact supply, which could drive recent buyer sentiment.
“On the demand side, we have seen increases in recent Global Dairy Trade events. While this has been encouraging, it is not yet clear whether the stronger demand from China will be sustained. Customers remain relatively cautious regarding their forward purchases for other key regions.”
Hurrell stated that it was still early in terms of the proportion of Fonterra’s FY24 sales book that it has contracted, so Fonterra will still face significant exposure to volatility in commodity prices. Exchange rate volatility is another factor to keep in mind. Its foreign exchange hedging strategy is designed to help lessen this impact and supports a higher Advance Rate level than would be possible without hedging.
Fonterra will continue to let its farmers and the market know as soon as it can when Fonterra thinks things have materially shifted.