Fonterra Increases Farm Gate Milk Price Forecast, Again

September 27, 2013 — Fonterra Cooperative of New Zealand announced an increase in its forecast farm gate milk price for the 2014 season, the third time in two months. The latest increase amounts to about 50 cents to $8.30/kg. What does this amount to in U.S. dollars and why should U.S. dairy producers care about this?

“With our calculations, we have a number converting back after currency and the differences between fat and protein content of New Zealand milk versus U.S. standards of milk to be about a $21-$21.55 milk price, and I would equate that to an All Milk price,” Eric Meyer of High Ground Dairy reported to DairyBusiness Update.

“Given the fact that Fonterra is one of the largest players in the global markets and have issued yet another increase in their forecast payout Fonterra– if realized by the end of their fiscal year, or milking year a record – this could have a bullish impact across the entire global dairy complex and given the fact that our futures curve is currently discounted to that, that could mean good things for dairymen in the near future,” he said.

So why is Fonterra so optimistic about next year?

“They’ve had solid demand,” Meyer reported. “On the transparent global dairy trade, the numbers for their dairy commodities that they sell on that platform have been bullish, as have the forward curves. They sell out of six months and so we’ve seen some fairly high and fairly flat curves on that market. They have a very close relationship with the folks in China and Chinese demand has been fairly insatiable throughout the course of this year. According to our calculations their numbers have been, on polling whole milk powder imports, up over 40 percent versus last year. So, the sustained importing and strength of the Chinese demand picture has lifted their forecast picture quite a bit,” he concluded.

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