Fonterra has released a record high opening forecast for next season's farmgate milk price, crediting increasing global demand for dairy products.
Fonterra chief executive Miles Hurrell said strong demand for dairy and an improving global economic environment was behind the forecast. Photo: RNZ / Dan Cook
The co-op's forecast range for the new season, which kicks off next month, has a mid point of $8 per kilogram of milk solids.
Meanwhile, for the season just ending Fonterra narrowed its forecast range, leaving the mid point 5 cents lower at $7.55.
Chief executive Miles Hurrell said strong demand for dairy and the improving global economic environment was behind the $8 midpoint forecast.
"At this point it would see the Co-op contributing more than $12 billion to the New Zealand economy next season."
Farmers were paid $8.40 for the 2013-2014 season but the opening price was $7 - making today's forecast the highest ever.
He said the large range in the forecast farm gate milk price, of $7.25 - $8.75, is due to the number of identified risks over the next 18 months.
"Some of the major risks include Covid-19, which is far from over, the impacts of governments winding back their economic stimulus packages, foreign exchange volatility, changes in the supply and demand patterns that can enter dairy markets when prices are high and, as always, potential impacts of any geopolitical issues around the world," Hurrell said.
Hurrell said at a mid-point of $7.55 for the season just ending would be the second year in a row with the forecast farmgate milk price above $7 per kilogram of milk solids.
"Global demand for dairy, especially New Zealand dairy, is continuing to grow, China is leading the charge as its economy continues to recover strongly.
"Prompted by Covid-19, people are seeking the health benefits of milk and customers are wanting to secure their supply of New Zealand dairy products and ingredients," he said.
NZX senior dairy analyst Amy Castleton said the wide-range forecast was expected.
"Plenty of risks remain on the horizon, and with the full season yet to run the Co-operative will want to be somewhat conservative,"
"However, if the low end of the range was achieved - $7.25 per kilogram of milk solids - that is still an excellent milk price for New Zealand's dairy farmers," Castleton said.
Fonterra also released its third quarter update, reporting a net profit of $587m in the nine months to 30 April, up 61 percent year-on-year.
Reported net profit after tax was $603 million, up 2 percent.