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Fonterra has lowered its FY23 forecast farmgate milk price from NZ$8.20 – $8.80 per kgMS to NZ$8.00 – $8.60 per kgMS.
The change on April 3 reduced the midpoint of the range by 20 cents from $8.50 to $8.30 per kgMS. Fonterra CEO Miles Hurrell said the change reflected short-term demand for products that informed the co-op’s farmgate milk price being softer than expected.
“Since our last update in February, prices for our products on GlobalDairyTrade have either declined or remained flat,” Miles said. “Skim milk powder prices have fallen 7% since February, and whole milk powder prices have not lifted to the levels assumed in the previous forecast.
Demand from China for whole milk powder had not yet returned to expected levels and northern hemisphere milk production and therefore skim milk powder stocks, were increasing as they headed into their spring flush, he said. Prices had not increased to the levels required to sustain a higher forecast farmgate milk price for this season.
“We recognise this change has an impact on our farmers’ businesses, at a time when many are facing increasing costs,” he said.
“To assist on-farm cash flow, we are adjusting the advance rate schedule, which is the proportion of the season’s farmgate milk price paid to farmers each month, to get cash to our farmers earlier.
“We have increased the March – paid April payment and plan to hold payments at that level until June.
“We are able to do this because of the strength of the co-op’s balance sheet, which is further supported by our strong full year earnings forecast.”
Fonterra’s full year forecast normalised earnings of 55-75 cents per share remained unchanged, Miles said.
