Monday, April 22, 2024

‘Challenging time’ as Fonterra cuts forecast again

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Midpoint drops below $7 in wake of GDT nosedive.
Fonterra CEO Miles Hurrell says that ‘GDT prices have fallen sharply since we released our opening forecast for the season in May, with the overall index down 16% over that period’.
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Fonterra has reduced its 2023-24 season forecast farmgate milk price range again, with the midpoint dropping a further 25c to $6.00-7.50/kg MS, with a midpoint of $6.75. 

Fonterra chief executive Miles Hurrell said Global Dairy Trade (GDT) prices have continued to fall since it revised its farmgate milk price earlier this month.

“GDT prices have fallen sharply since we released our opening forecast for the season in May, with the overall index down 16% over that period.  

“While our wide forecast range assumed movement in GDT prices, whole milk powder prices fell 10.9% in the most recent trading event, requiring us to revise our position again. 

“Reduced demand from key importing regions for whole milk powder is continuing to weigh on prices. While indications are demand will start to return over the second half of FY24, we do expect the pace of demand growth to be subdued relative to initial expectations.     

“In the meantime, we will continue to respond to market signals and adjust our forecast farmgate milk price to ensure that the impact of current prices and currency movements is transparent.

“This is a challenging time for New Zealand’s dairy farmers and the co-op is doing all it can to support its farmers,” Hurrell said.  

Federated Farmers dairy chair Richard McIntyre said the latest forecast drop is a bitter pill to swallow for farmers who are already under significant pressure.

“Two weeks ago, farmers were looking at a midpoint of $8/kg MS, but things have rapidly deteriorated and we’re now looking at $6.75. That’s a significant drop,” McIntyre said.

DairyNZ released an updated national average breakeven figure for the season of $7.51 excluding principal repayments on debt, which means, on average, farmers will be losing at least 76 cents on every kg/MS they produce this season, he said.

“The psychological impact of that for dairy farmers, who are in the thick of calving and working long hours in the elements, can’t be underestimated.

“They’re going to work every day, slogging their guts out to provide for their families, and coming home poorer than when they walked out the door at 4am that morning.”

McIntyre said that’s the reality for thousands of farming families, who are under serious financial stress and will be having some really challenging conversations around their dining room tables.

“There’s no denying that it’s going to be a challenging season, so it’s more important than ever that banks, dairy companies and the government are working with farmers to help them through it.

“Now isn’t the time to be adding any new costs or complexities for farmers who are just trying to keep their heads above water,” McIntyre said.

This article had been updated to include additional commentary.

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