Fonterra Co-operative Group, a significant player in the global dairy industry, has announced a revision to its projected Farmgate Milk Price range for the 2023/24 season.
The initial forecast, ranging from $6.25 to $7.75 per kgMS with a midpoint of $7.00 per kgMS, has been adjusted to a new range of $6.00 to $7.50 per kgMS, centering around a midpoint of $6.75 per kgMS.
Miles Hurrell, the CEO of Fonterra, shed light on the rationale behind this adjustment.
"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."
The GDT price trend has experienced a pronounced descent since the unveiling of the season's opening forecast in May, marked by a substantial 16% reduction in the overall index during this 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."
Notably, the sustained diminution in demand from key importing regions for whole milk powder remains a persistent factor influencing the pricing trajectory.
Hurrell is optimistic there is light at the end of the tunnel but was honest about the unpredictable nature of how far away that light could be.
"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."
Amidst the prevailing market dynamics, Fonterra emphasizes its commitment to agility, utilizing market signals and currency variations as guidance to adjust the forecast Farmgate Milk Price.
"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,”
Fonterra Co-operative Group continues to navigate the intricate dairy market landscape with an eye on emerging developments, ensuring alignment with the evolving dynamics to sustain the industry's integrity and viability.
