Farmers start new dairy season on an encouraging note as Fonterra signals another record milk price

New  Zealand’s  dairy  industry, which is  proving  again it is  the  backbone of  the  country’s  export industries, has  been  given  fresh encouragement with the big  co-op Fonterra signalling  a  record  milk price for  the  season  that  has  just  opened.

It  comes  as the  payout  for  the  just-finished  season  stands  as  the  highest  since  the  co-op  was  formed in 2001.

So although farmers have  made  decisions for  this  season on  the  number  of  cows  they  are  milking,  they  have the  incentive  to go  hard on production  levels,  despite the  pressure  from  higher  costs  and worries  over climate changes measures, including  projected charges on emissions.

Fonterra’s buoyant  forecast contrasts with  a recent  report  by agribusiness banking specialist Rabobank  which  said that despite global milk production looking set to decrease for the fourth consecutive quarter in Q2 2022, weakening global demand is expected to create a scenario that will see moderate price declines in dairy commodities during the second half of the year.

Dairy prices are rising again but the movement of Fonterra share prices (not so cheery for farmers) prompts buyback plans

New Zealand’s  dairy   farmers, who  will be  receiving  a  record  payout from  most of  the processing  companies  they have  supplied in the 2021-22 season,  will be  relieved that the  average price rose  again at the latest Fonterra auction, snapping five consecutive falls.

While  demand  from the  China  market  remained relatively weak, other regions stepped in to take up the slack. The GDT price index rose 1.5% to 1359 (the first increase since the March 1 auction when the index hit a record 1593}, a  level  well  above  recent  seasons.

Covid-19 lockdowns in China have disrupted supply chains and weighed on dairy markets, with North Asian buyers recording their fourth-smallest volume of whole milk powder at the latest auction.

NZX dairy insights manager Stuart Davison said South-east Asia took the largest volume of both milk powders, purchasing well over half the total whole milk powder sold, which was the biggest proportion of all, while also purchasing the largest volume of skim milk powder.

Fonterra announces record opening milk price payment for its farmers next season as demand remains strong

New Zealand  has  suffered  several  jolts  in  the  past week, not  least a  higher interest rate regime as the Reserve  Bank counters  surging inflation.  But  at least  one  beacon of  light shines through the gloom:  the country’s leading primary  export  industry’s boom   is  moving  to a  second  season  of high prices.

Dairy  giant Fonterra,  which sets  the  pace  for  other dairy processors,  has announced a record opening milk price payment for farmers next season amid expectations of continued strong demand for dairy products and constrained global supply.

The co-op expects to pay farmers between $8.25 and $9.75kg/MS  for the season starting next month.  The mid-point, on which farmers are paid, is $9 kg/MS.

That breaks the previous record set at this time last year, when Fonterra’s opening price for the current season was $7.25 – $8.75kg/MS, with a mid-point of $8kg/MS.

Dairy prices fall sharply but farmers will do nicely, thank you, from this season’s payout and Synlait has strong half-year

Only  two  months  ago  Radio NZ  was  airing  a  report “Why  are global dairy  prices  so high?”  Now, the  story  is  rather  different  after  two sharp  falls  at  Fonterra’s  fortnightly  global dairy  auctions,  and  the  pundits   are  pondering  what  has  happened.

But  NZ’s  dairy farmers  can still rest  easy  that  this  season’s  payout  will be  the  highest in Fonterra’s  history.

The  latest fall this  week was  foreshadowed  in  a  report  by ANZ  agri-economist  Susan Kilsby  on commodities. She  noted  dairy prices fell 4% month-on-month in April, driven primarily by lower prices for whole milk powder which is highly influenced by demand from China.

Kilsby  went  on to  point  out market sentiment had deteriorated as the lockdowns in Shanghai and Beijing impact consumer buying opportunities.

“The global supply of milk increases at this time of the season due to the Northern Hemisphere reaching peak milk output, but global production still remains relatively tight, which will limit how far prices fall”.

 Kilsby said it was becoming increasingly difficult to get refrigerated goods into China.

“Milked” (the movie) presents a sour view of our biggest export industry – but dairy farmers can learn from it it anyway

A documentary titled Milked,  shown  at the  International Film  Festival in Dunedin, seeks  to  “expose”  the  New Zealand  dairy industry   and  calls  on  New  Zealanders  “to  heal the  land”.

Milked is available globally via the streaming platform Waterbear and on Youtube via Plant Based News. The documentary is made by indigenous activist Chris Huriwai and local director Amy Taylor.

Its crowd-funding campaign surpassed an ambitious $100,000 target in just 12 days, with much international support confirming its global relevance. Huriwai  told  one  news  outlet:

“My wish for this film is that it empowers people to look at the problems we’re facing more holistically. If you’re looking for a solution, it has to encompass everyone within the system and their diverse perspectives. This film is about sparking that conversation”.

But is  NZ  looking  for  a  “solution?”

The   dairy industry is  a world leader not  just  in its  products,  but  in  its systems.

In a  review for Newshub, Daniel  Rutledge says:

Fonterra is well placed to win Kiwi acclamation as a corporate champion

Can  Fonterra, with  its capital restructured,  become   the national champion,  it  was always  intended to be?.

The  stars   are  aligned  as  they  never have been before.

The  dairy  giant  has  the  products,  the  bosses,  the  markets, the  support of almost  all  its suppliers,  plus  the  government’s  backing.

It seems the  high  international prices  currently  prevailing  will  persist  for  another  season, and  maybe  two, which  would  be  the  longest stretch   in  Fonterra’s 20-years- or-so history.

With  Peter McBride as  chairman  and  Miles  Hurrell as  CEO, Fonterra   has  re-shaped the  leadership  and  narrowed  the   goals.

O’Connor now will support law changes needed for Fonterra’s capital restructuring

Agriculture  Minister  Damien  O’Connor has  overcome  his objections to  the  capital restructuring of  dairy giant Fonterra  and  says  the  government  will  now  amend the Dairy Industry Restructuring Act.

The dairy giant wants to make it easier to join the company, while maintaining farmer ownership amid falling milk supply.

O’Connor  recognises  Fonterra as a key part of New Zealand’s world-leading dairy industry and a major export earner for the economy, sending product to over 130 countries.

Around 95% of all dairy milk produced in New Zealand is exported, with export revenues of  $19.1bn a year. It accounts for 35% of NZ’s total merchandise exports and around 3.1%  of GDP. The industry employs around 49,000 people.

World dairy prices ease from record peak but the industry is the big driver of export receipts as trade deficit widens

Dairy prices levelled  off  in  Fonterra’s  latest  Global Dairy Trade auction  but  remain  close  to the  peak reached  at  the  previous  auction  a  fortnight  previously.

The GDT price  index  eased 0.9%  to 1579, the second-highest level on record, down from 1593.

Dairy farmers   who  had  seen prices  surge  in  the  past  five  auctions  may  have  been disappointed.  But  as Westpac senior agri economist Nathan Penny pointed  out, uncertainties around global dairy demand arising from surging Covid-19 case numbers in China, the world’s largest dairy market, is likely to have weighed on prices.

Fonterra  has  steadily  raised  its  forecast payout  to  the  $9.30-$9.90kg/MS range – the  highest it has  ever been – as  the  GDT index  has  climbed  18%  this  season.

The average price for whole milk powder (WMP), which has the most impact on what farmers are paid, fell 2.1% to US$4596 (NZ$6801) a tonne at the latest auction.  On the  other  hand, skim milk powder, also a key driver of the milk price paid to farmers, rose 1.6% to US$4545/t, the highest level since 2013.

NZ’s economic outlook is given a lift as dairy prices rise again

Dairy prices have  hit  a  new  peak at  Fonterra’s Global Dairy Trade  auction.  The GDT index shot up 5.1% to an average price of US$5,065 (NZ$7,509). Whole milk powder rose 5.7% to US$4,757 a tonne while cheddar rocketed up 10.9% to $6,394.

Butter prices gained 5.9% to an average US$7086/tonne, anhydrous milk fat 2.1% to US$7048/tonne and butter milk powder firmed 5.8% to US$4217/tonne. Skim milk  powder was  up 4.7% to US$4481/ tonne.

“This train isn’t slowing down,” said NZX dairy insights manager Stuart Davison.

Other  business-sector commentators  see  the  boom in the dairy  sector   injecting  new  strength into  the  economy at a  time  when it is badly  needed, with  other sectors  like international tourism  and  hospitality hard hit  by the Covid pandemic.

Bidding at  the  auction was  fierce, driven by the  tight supply   position,  as well  as  Russia’s war  on Ukraine.

Fonterra lifts milk payout forecast to record level – but farmers will be soured if govt demands their herds be culled

Dairy  giant Fonterra has lifted its 2021/22 forecast farmgate milk price range to $9.30 – $9.90kg/MS, up from its previous forecast of $8.90 – $9.50.

This increases the midpoint of the range, at which farmers are paid, by 40c to $9.60 – easily the highest on record.

At that level, Fonterra estimates that the milk price  payout will contribute $14bn this season to the NZ economy.

Truly  exciting times for the dairy industry and  rural regions.  They  have  become  even more  important, as a  key prop to the economy  through the Covid pandemic, because of the  loss of  earnings from the international tourism  and  hospitality industries.

Fonterra is  performing  brilliantly under CEO Miles Hurrell, not  just in boosting  the co-op’s achievement of  a  record  payout, but  in turning  its  own finances  around after problems left by  the previous  administration.  Moreover it is exploiting technical  advances –  in  the  tanker fleet, for example, the first e-tanker  has  hit the road.