New Zealand lifts farmgate price, Australian dairy optimistic

Fonterra has lifted its NZ farmgate price indicators. Does it spell much-needed good news for Australian dairy farmers?

Farmgate hopes of a springtime step up are being lifted by buoyant international dairy conditions and a New Zealand financial fill-up.

The headline figure at last week’s fortnightly session of the Global Dairy Trade index lifted a whopping 5.5 per cent, to sit at US$3920 (A$5784) a tonne.

The late August rally is the largest percentage jump to the headline figure since March 2021, when Chinese dairy purchasing was turbocharged by the pandemic.

Whole milk powder prices lead the way with a 7.2 per cent rise to reach US$3482 (A$5137) a tonne while the butter category rose 3.7 per cent to hit US$6706 (A$9894) a tonne.

Skim milk powder also lifted by a strong 4 per cent to US$2636 (A$3889) a tonne.

Australian Dairy Farmers president Ben Bennett said he was cautiously optimistic about the latest GDT session and its potential for change at the farmgate.

He noted Fonterra’s move across the Tasman to lift its Kiwi farmgate to NZ$8.50 (A$7.79) per kilogram of milk solids.

“The ball is now in the court of the processor,” Mr Bennett said.

“Not just Fonterra, but Saputo, Bega, Lactalis and the rest.

“Dairy farmers will be watching. We’re not saying they have to lift their prices tomorrow but there’s certainly the right market conditions for them to provide step ups.

“We will give them some time to look at their figures but rest assured, we’ll be watching.”

The GDT lift comes only weeks after Saputo’s Canadian management came under fire from the ADF and other dairy leaders over comments made by a Toronto-based executive.

Saputo chief financial officer Maxime Therrien told investors he hoped the Australian farmgate price “would stick... for as long as we can” at the low figure of roughly $8.20 per kilo milk solids.

Dairy Farmers Victoria have estimated the cost of production in the state sits between $7.90 and $8.20 per kilo milk solids, meaning many farmers are currently either breaking even or barely making a profit.

Fonterra global markets president Richard Allen noted the previous fortnightly session also surprised market watchers.

The processor’s Australian management is yet to indicate any change to farmgate pricing locally, which sits around the $8.10 to $8.30 per kilo milk solids mark.

“Certainly another strong result for where we are in the season. It’s still early days but it’s great to see (buyer) participation from right around the world,” Mr Allen said.