Kiwi milk price drops: $NZ8/kg milk solids

Fonterra has cut its 2023-24 milk price forecast to between $NZ7.25 and $NZ8.75 per kgMS, down 20 cents on this season’s close.

Global uncertainty has forced Fonterra to cut the current season price to $NZ8.20 and open with a 2023-24 midpoint price that is even lower.

New Zealand dairy giant Fonterra has announced an opening season midpoint milk price of $NZ8 a kilogram milk solids, down 20 cents on this season’s close.

Fonterra CEO Miles Hurrell said the co-operative had forecast a wide-ranging opening price of $NZ7.25 to $NZ8.75 per kgMS, with a midpoint of $NZ8.00, given the uncertainty over Chinese demand.

“We expect demand to gradually strengthen over the course of FY24 as China’s economy continues to recover from COVID-19,” Mr Hurrell said.  

“However, the timing and extent of this remains uncertain, with China’s in-market whole milk powder stocks estimated to be above normal levels following increased domestic production.”

He said the current 2022-23 forecast had also been cut back to a midpoint price of $NZ8.20 kgMS, compared to an earlier forecast of $8.30/kgMS.

“(NZ) Global Dairy Trade prices have not recovered to the levels required to hold the previous midpoint for this season,” Mr Hurrell said.

“For these reasons, we have narrowed the forecast range for the 2022-23 season from $NZ8.00 – $NZ8.60 per kgMS to $NZ8.10 – $NZ8.30 per kgMS and reduced the midpoint from $NZ8.30 per kgMS to $NZ8.20 per kgMS.”

However, many NZ Fonterra suppliers will also share in a what Mr Hurrell said would be a strong full-year dividend.  

In Australia, opening 2023-24 milk prices are set to be at least 7 per cent down on this season, cutting the southern-region weighted average from $9.60 a kilogram of milk solids to $8.93kgMS.

Fonterra Australia Suppliers’ Council chairman Alan Davenport said it was too early to comment on opening prices in Australia, which under the mandatory dairy code must be announced by 2pm on Thursday June 1.

However, he said competition for milk domestically in Australia was strong and would keep prices buoyant.

“There’s been a lot of talk about international prices when they go up and down,” Mr Davenport said.

But there’s still quite a lot of competition for milk supply out there because of the strong local demand. Processors will be bringing their A-game to pricing because of (that factor).”

In the meantime, Fonterra reported a profit after tax of $NZ1.326 billion, equivalent to 81 cents per share, for the third quarter of FY23.  

“Excluding the net gain from divestments, our normalised profit after tax improved on last year, up $NZ606 million to $NZ1,078 million, equivalent to NZ65 cents per share,” Mr Hurrell said.  

“This is due to strong performance in our ingredients channel, with continued higher margins in our cheese and protein portfolio, particularly casein and caseinate.  

“These favourable price relatives have continued longer than expected, and we’re also seeing improved performance coming through in our food service and consumer channels, in particular in global markets.  

“As a result, we have lifted our FY23 full year forecast normalised earnings to NZ65-80 cents per share from NZ55-75 cents per share and remain on track for a strong full year dividend.”