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Fonterra lifts NZ price forecast to record levels

Fonterra has lifted its forecast New Zealand farmgate milk price range to record levels on the back of strengthening global prices.

But there are yet no indications that major Australian processors will follow suit.

Burra is the only Australian processor to have announced a step up this year.

Fonterra lifted its NZ forecast to a midpoint $NZ9.20 a kilogram milk solids – with a range of $NZ8.90-$NZ9.50/kg MS.

The increase followed a strong result on the Global Dairy Trade auction last week, where prices jumped 4.6 per cent.

It also follows a 1.6pc NZ production downgrade from Fonterra earlier this month.

Australian market analyst Freshagenda is reporting record Australian dairy commodity spot prices.

Its spot commodity milk value and dairy export index increased this week, as the result of stronger dairy commodity prices following the GDT auction and a weaker Australian dollar.

In spot quotes from Australasian exporters, butter rose $US320/tonne from last week to $US6160/t.

Skim milk powder was also stronger, up $US200/t to $US3970/t, while whole milk powder was up $US100/t to $US4100/t and cheddar was up $US50/t to $US5350/t.

Constrained global milk supply

Fonterra chief executive officer Miles Hurrell said the forecast increase for NZ farmers was the result of consistent dairy demand at a time of constrained global milk supply.

But Mr Hurrell warned the co-op was keeping a close eye on a number of factors.

These included growing inflationary pressures impacting on operational costs and the increased potential for volatility, as a result of high dairy prices and economic disruptions from COVID-19, particularly as governments responded to the rapid spread of the Omicron variant.

NZ bank ASB economist Nat Keall said last week’s GDT result meant an NZ record high milk price for the current season was a practical certainty.

All commodities rose at the auction, led by the key whole milk powder index, which rose 5.6pc to $US4082/tonne.

“The key question will be how long it takes before prices start to move down,” he said.

Westpac senior agri economist Nathan Penny said the hot start to the year for the GDT reflected recent dry weather that had further crimped already sluggish dairy production.

“From here, we expect that weakness in New Zealand dairy production will further underpin global dairy prices at least in the short term,” he said.


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