Fonterra Cooperative Group Limited revised its 2022 to 2023 season forecast Farmgate Milk Price range from NZD 8.20 - 8.80 per kgMS to NZD 8.00 - 8.60 per kgMS.
This reduced the midpoint of the range by 20 cents from NZD 8.50 to 8.30 per kgMS.
Fonterra CEO Miles Hurrell stated that the change reflects short-term demand for products that inform the cooperative’s Farmgate Milk Price being softer than expected.
“Since our last update in February, prices for our products on Global Dairy Trade have either declined or remained flat.,” revealed Hurrell.
The CEO shared that skim milk prices have fallen seven percent since February, and whole milk powder prices have not lifted to the level approximated in the previous forecast.
The two main aspects behind this are that demand from China for whole milk powder has not met the expected levels. Secondly, the Northern Hemisphere milk production, and by default, skim milk powder stocks, have increased as they are headed into spring flush.
“With these factors weighing on demand, prices have not increased to the levels required to sustain a higher forecast Farmgate Milk Price for this season. We recognise this change has an impact on our farmers’ businesses at a time when many are facing increasing costs.”
The cooperative has adjusted the Advance Rate schedule, which is the amount of the seasons Farmgate Milk Price paid to farmers monthly to assist immediate cash flow for farmers. This will result in farmers receiving cash earlier.
“We have increased the March paid April payment and plan to hold payments at that level until June.”
The cooperative can provide this support due to the solidity of the balance sheet, which a solid full-year earnings forecast has supported. The full-year forecast of normalised earnings of 55-75 cents per share has remained unchanged.
Hurrell expressed that the cooperative remains optimistic about the outlook for the next season and would share an opening of the 2023 to 2024 Farmgate Milk Price forecast in May.
