Fonterra has increased its forecast farmgate milk price for the current season - to a record midpoint of $9.60 a kilogram of milk solids.
File image. Photo: RNZ / Rebekah Parsons-King
The new range is $9.30 to $9.90 up from $8.90 to $9.50 per kilogram of milk solids. It comes after four consecutive solid lifts at the Global Dairy Trade Auction.
Fonterra CEO Miles Hurrell said the lift in the forecast reflected the increase in global dairy prices since the co-op's last milk price update in January, and good levels of ongoing demand for dairy, all while global milk supply growth continued to track below average levels.
"Since we last revised our forecast, average Whole Milk Powder prices on GDT have increased 10.3 percent, while Skim Milk Powder has increased 8.4 percent. Both products are key drivers of our milk price," Hurrell said.
The forecast midpoint of $9.60 per kgMS represented a cash injection of over $14 billion into New Zealand's economy through milk price payments alone, he said.
"It will be welcome news for farmers who are facing rising costs on farm, including from inflation and rising interest rates.
"Analysis by Statistics New Zealand shows a number of key farm inputs have experienced significant inflation pressure over the past two years, for example electricity costs are up 21 percent, while stock grazing costs are up 36.9 percent."
Milk production in the EU and US continued to be impacted by the high cost of feed and that not expected to change in the coming months, Hurrell said.
"Here at home, ongoing challenging weather conditions have continued to impact grass growing conditions, as a result, the co-op has revised its 2021/22 New Zealand milk collections forecast to 1480 million kgMS, down 3.8 percent compared to last season."
"This reduction in supply reinforces our strategic focus on ensuring our milk is going into the highest value products."