September 6, 2011

Fonterra maintains milk price forecast

Fonterra kept its farmgate milk forecast consistent in spite of a drop of more than 15% in dairy market values, and a warning from peer and business partner FrieslandCampina of a "stagnant" European market.

New Zealand-based Fonterra, the world's top dairy exporter, held at NZ$6.75 (US$5.61) per kilogramme of milk solids its estimate for payouts to its farmers in 2011-12.

The forecast comes despite a continued drop in world dairy prices since the figure was first released in May. 

Since then, prices of skimmed milk have fallen by more than 20% at Fonterra's globalDairyTrade auctions, with wholesale milk for short-term delivery hitting a one-year low at the last event, two weeks ago.

Indeed, Cees 't Hart, the chief executive of Dutch dairy giant FrieslandCampina, warned that "there is no growth in consumption" in dairy consumption in Europe, the world's biggest market for products such as cheese and skim milk powder.

Sir Henry van der Heyden said the co-operative had "largely anticipated" in its payout forecast the fall in dairy prices since May.

"In volatile economic and market conditions, we could face a range of factors that may affect the season's milk price," Sir Henry said.

"But at this very early stage of the season we see no reason to alter the forecast," he added, while acknowledging the threat to estimates from the revived fears of another global economic downturn.

"We will continue to monitor possible slowing global economic growth that might translate into weaker dairy demand."