January 25, 2022
Fonterra lifts forecast for Farmgate Milk Price range
Fonterra Co-operative Group lifted on January 25 its 2021/22 forecast Farmgate Milk Price range to NZ$8.90-9.50 (US$5.94-6.34) per kgMS, up from NZ$8.40-9.00 (US$5.61-6.01) per kgMS.
This increases the midpoint of the range, which farmers are paid off, by 50 cents to NZ$9.20 (US$6.14) per kgMS.
Fonterra chief executive officer Miles Hurrell said the lift in the 2021/22 forecast Farmgate Milk Price range is good news for both farmers and New Zealand communities. The new midpoint of NZ$9.20 per kgMS would contribute NZ$13.8 billion (US$9.2 billion) to the New Zealand economy this season.
"The increase is the result of consistent demand for dairy at a time of constrained global milk supply," Hurrell commented.
"In general, demand globally remains strong – although, we are seeing this vary across our geographic spread. Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs.
"It's a similar supply picture in New Zealand. Earlier this month, we reduced our forecast milk collections for 2021/22 from 1,525 million kgMS to 1,500 million kgMS due to varied weather and challenging growing conditions.
"While the higher forecast Farmgate Milk Price does put pressure on our margins in our consumer and foodservice businesses, prices in our ingredients business are favourable for milk price and earnings at this stage. As a result, we remain comfortable with our current 2021/22 earnings guidance of 25-35 cents per share."
Hurrell added that there are a number of factors the cooperative is keeping a close eye on, including growing inflationary pressures impacting on operational costs, the increased potential for volatility as a result of high dairy prices and economic disruptions from COVID-19, particularly as governments respond to the rapid spread of the Omicron variant.