Fonterra has narrowed its farmgate milk price range to NZ$8.00kgMS to NZ$8.60kgMS, down from NZ$8.20kgMS – NZ$8.80kgMS. The new mid-point of NZ$8.30kgMS is NZ$0.20kgMS lower than the previous forecast midpoint.
According to CEO Miles Hurrell the change reflects softer than expected short-term demand for products that inform the farmgate milk price. SMP prices are down 7% since February and WMP prices on GDT haven’t lifted to the levels assumed in the previous forecast. Hurrell said Chinese demand had not returned as expected and increased milk production in the Northern Hemisphere and higher SMP stocks are driving prices. Hurrell said Fonterra is adjusting its Advance Rate Schedule to get cash to farmers earlier recognising that farmers are facing increasing costs.
Meanwhile, Fonterra’s latest Global Dairy Update indicates milk collections lifted 2.7% YOY to 130.3m kgMS in February, bringing season to date collections 1.1% behind the prior year. February milk collections were disrupted by Cyclone Gabrielle but ended with strong North Island production. North Island intake lifted 6.4% YOY in February, with season to date production tracking 2% behind the prior year. In the South Island, dry and warm weather negatively affected milk production, with February intake down 1.5% YOY, taking season to date production 0.3% ahead of last season.