Economic boost of almost $14bn comes from lift in Fonterra milk payment

While  most   of  the  economy  is  struggling  with the  impact  of the Covid pandemic, the dairy industry  is  riding  a  prosperity  wave.

In the  wake  of  high prices recorded at  last week’s Global  Auction,  the  big  co-op Fonterra has lifted its forecast milk payment to farmers for this season to a new record level  between $8.90 and $9.50kg/MS.. That’s up from its forecast in early December of between $8.40 an d $9kg/MS..

The midpoint of the range, which farmers are paid off, increased to $9.20kg/MS from $8.70, the highest level since Fonterra was formed in 2001. The co-op paid farmers $7.54kg/MS last season, and its previous record was $8.40kg/MS in the 2013/14 season.

Global dairy prices hit an eight-year-high at auction last week, as tight milk supply has strengthened  demand for New Zealand’s most  significant export commodity. Prices have been supported this season by weaker milk production in this  country   because  of poor weather and higher feed costs.

“The increase is the result of consistent demand for dairy products at a time of constrained global milk supply,” said Fonterra CEO Miles Hurrell.

“In general, demand globally remains strong – although, we are seeing this vary across our geographic spread.”

As  Point  of  Order  noted  last week, the  high payout means  Fonterra’s  farmer-suppliers  will  receive  just  under a  total $14bn  with the  payout.

Farmers   may be  encouraged to prolong  the  milking  season  as  long  as  they  can, because  of  the  strong price, although it  has been  a  difficult  year  for  many  because of labour shortages.

In  any  case   the  pressure  on global milk  supplies  may ensure high prices across the  dairy  product  range   can  be sustained  into  the  next  season.

The  rest  of the  country  has  to put  up with increased  prices in the  domestic market — but  at  least the  buoyancy in   the  dairy industry  helps  to  offset the  higher  costs  of  imported goods  as  a result  of the pandemic

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