- New Zealand dairy king Fonterra has raised its forecast of milk prices going into 2020
- Prices originally measured at an average of $6.75 per kilogram of milk solid have been upgraded to an average of $7.05 per kilogram — with possibility of a maximum $7.55 per kilogram
- The company also said today it will measure the advance rate paid to farmers at the midpoint of $7.05 per kilogram
- Milk prices are a hot topic today, as Labor MPs agreed to back a bill put forward by One Nation Senator Pauline Hanson for legislative control on prices in support of dairy farmers
- Shares in Fonterra are still today at $3.69 each, trading in a $376.3 million market cap
New Zealand dairy king Fonterra has raised the forecast prices of its milk products going into 2020.
Originally the company had penned prices at $6.25 to $7.25 per kilogram of milk solid, now revised at $6.55 to $7.55 per kilogram of milk solid.
“Demand for whole milk powder (WMP) has been firm, and for the full season we’re expecting it to be above last year,” Fonterra Chairman John Monaghan said today.
“Global WMP production is down year to date and expected to continue to decrease for the remainder of 2019,” he added.
The advance rate to farmers that Fonterra pays will be set off at a mid-point of $7.05 per kilogram of milk solid.
John Monaghan stated the company will also continue to sell its skim milk powder products at higher prices than European and American based dairy companies.
In a media release to shareholders, Fonterra CEO Miles Hurrell said the news was a positive signal for milk prices, but variables in the market could still exist.
“It is still very early in the season and a lot can change,” he said.
“There are a number of factors we are keeping a close eye on, which is why we’ve retained a wide forecast milk price range.”
Possible factors include changes in global trade and political variables in key sale regions.
“And, as is always the case, we cannot predict the weather and clearly weather conditions play a big role in global supply,” he added.
The CEO maintained his stance today was to focus business on supporting regional New Zealand industries.
“If you take the $7.05 mid-point of today’s revision to our forecast Farmgate Milk Price, it’s another $450 million into regional New Zealand,” he explained.
“The mid-point of the revised range does mean our teams will need to continue to push hard to achieve our margins, but so far we’re comfortable with how this season is shaping up in terms of underlying business performance.”
Shares in Fonterra are stagnant today at $3.69 each, trading in a $376.3 million market cap.
Pauline and the standoff
The dairy industry has had its fair share of media spotlight this month as One Nation leader Pauline Hanson called for action in supporting the industry’s farmers.
URGENT ACTION NEEDED TO RESTORE DAIRY INDUSTRY
The plight of the Queensland dairy industry has been in the spotlight with One Nation leader Pauline Hanson and the state’s advocacy body stepping up calls for urgent action.@nqregister #auspolhttps://t.co/KjU90CTDVY— Pauline Hanson 🇦🇺 (@PaulineHansonOz) October 22, 2019
Last week, Pauline pleaded to Australia’s bipartisan political parties to support its country’s dairy farmers who were facing pressure due to the lack of legislative control over milk pricing.
Last Friday she broke down in tears on Sydney 2GB radio calling for action.
“I want to put out a call to these farmers; please don’t give up hope,” the senator said in an Alan Jones interview.
“Give me an opportunity to keep fighting. I don’t want these farmers to give up.”
Today Pauline won over support from Federal Labor to set a base price on milk products and enact a mandatory code of conduct for the nation’s dairy farmers.
Pauline put the bill forward last Wednesday, calling out retailers and processors for putting profits ahead of farmers working in the industry.
Labor MPs meeting today made a formal agreement to back the bill.