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Fonterra lowers forecast milk price for 2018/19 due to stronger global supply

Fonterra has lowered its forecast milk price for 2018/19 today from $6.75 per kgMS to a range of $6.25-$6.50 per kgMS due to stronger global supply.

Fonterra chief executive Miles Hurrell also announced an increase in forecast New Zealand milk collection volumes to 1,550 million kgMS, up by 1.3 per cent.

"I know how hard it is for farmers when the forecast Farmgate Milk Price drops, but it’s important they have the most up to date picture so they can make the best decisions for their farming businesses," he said in a statement.

"We are still seeing strong production coming from Europe, US and Argentina. While the hot weather in Europe has slowed down the region’s production growth, it is still tracking ahead of last year, US milk production is up slightly and Argentina’s is up 6.8%.

"At recent Global Dairy Trade (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 South East Asia, but it simply isn’t matching current levels of supply."

"In New Zealand, the season has got off to a positive start, mainly thanks to good weather and early calving in the South Island."

Mr Hurrell said providing a range for the forecast price was due to the volatile nature of production.

"We operate in a hugely volatile global market place, so it is very difficult to pinpoint an exact forecast Farmgate Milk Price this early in the season. For example, weather conditions can change suddenly and this can have a significant impact on the global milk supply."

"The final price could be outside this range as we are still early in the season and up against considerable volatility, we therefore recommend farmers budget with ongoing caution."

Fonterra is required to give a forecast for Dairy Industry Regulation Act purposes by 15 December 2018. 

Fonterra has cut its forecast for full-year earnings per share. Source: 1 NEWS