October 19, 2020

Fonterra increases its farmgate milk price due to higher demand from China

New Zealand-based Fonterra Co-operative Group Ltd increased the price range it will pay farmers for milk due to higher demand from its most important market China, Reuters reported.

Fonterra, the biggest dairy exporter in the world, increased its farmgate milk price between NZD 6.30 (~US$4.16; NZD 1 = US$0.66) and NZD 7.30 (~US$4.82) per kilogram of milk solids (kgMS), from NZ$5.90 (~US$3.90) to NZ$6.90 (~US$4.56) per kgMS. This suggests a midpoint of roughly 6% up.

Miles Hurrel, chief executive officer of Fonterra, said China’s dairy demand has swiftly recovered despite the initial impact of COVID-19, adding that the biggest demand and driver for milk price is for Whole Milk Power.

Fonterra has returned to profit and returned to paying dividends to farmers thanks to recovering demand for dairy and the company’s initiative to refocus business back to New Zealand. Dairy farmers make up the majority of Fonterra’s shareholders.

Hurrel said at a midpoint of NZ$6.80 (~US$4.49) per kgMS, more than NZ$10 billion (~US$6.60 billion) would flow into regional New Zealand.

Fonterra said it is monitoring how new COVID-19 waves and restrictions in Europe could affect global economic recovery.

Hurrell said the company projects a balanced dairy outlook, but will still recommend their farmers to be cautious with their decision making due to there still being a number of risks currently.

-  Reuters