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Dairy farmers could reap the rewards of a record farmgate milk price if Fonterra’s latest milk price forecast stands.
Yesterday, the co-operative increased and narrowed its forecast range to $7.90-$8.90kg ms, from $7.25-$8.75. The midpoint of the range, which farmers are paid off, has increased to $8.40 from $8.
At a $8.40 midpoint, it would equal the highest farmgate milk price paid by the co-operative and would see almost $13billion flow into regional New Zealand through milk price payments this season.
In a statement, Fonterra chief executive Miles Hurrell said the lift was a result of continued demand for New Zealand dairy relative to supply.
‘‘We have seen demand from China ease over the past couple of months, while other regions have stepped in to keep demand firm,’’ he said.
‘‘On the supply side, overall global milk supply growth is forecast to track below average levels, driven by a slowdown in US production due to the increased cost of feed.
‘‘These supply and demand dynamics are supporting the current pricing levels, and a higher contract rate has given us the ability to narrow the forecast range.
‘‘While the increase in milk price can put pressure on our input costs, we remain comfortable with our current 2021-22 earnings guidance range of 25-40 cents per share.’’
Mr Hurrell cautioned it was still early in the season, a lot could change, and there could be increased volatility when prices were high.
‘‘This is why we’re maintaining a plus or minus 50 cents forecast range, reflecting the continued uncertainties at this point in the season.’’
He said the co-operative was keeping a close eye on factors that could affect demand, including the Covid-19 pandemic’s continued impact on global markets, growing inflation pressures, volatility in exchange rates, New Zealand weather conditions and possible ramifications of geopolitical issues.
In a statement, Trade and Export Growth and Agriculture Minister Damien O’Connor said farmers’ hard work in leading New Zealand’s export-led recovery was being rewarded with both the high milk price forecast and also very strong returns for meat.
‘‘Our farmers and growers have been working hard maintaining their volumes and together, through the Covid response, we’ve been able to keep supply chains ticking and freight links open.
‘‘The resilience of all export sectors is vital to our ongoing economic strength,’’ Mr O’Connor said.
‘‘Just as we aim to have diversified export markets, we’re also focused on growing all our export sectors.’’
Red meat exports increased by more than a quarter in August compared with the same month last year.
Overall exports for August reached $650million, the 26% increase largely driven by higher beef exports, up 39% to $299million year-on-year.
In July, mutton prices hit $6.40 per kg, setting a new record high. They lifted further in August to reach $6.60 per kg.
Last month, lamb prices hit $9.40 per kg, and were predicted to remain high into next year.
Under the free trade agreement with the United Kingdom announced last week, dairy and red meat exports to the UK would ‘‘enjoy significant tariff-free quotas from day one in a market that we’ve effectively been locked out of for decades’’, he said.
Incumbent Fonterra directors Peter McBride, John Nicholls and Leonie Guiney have been announced as the independently assessed candidates for the 2021 directors’ election.
This year there are three board positions up for election. No other candidates put themselves forward for the independent assessment process.
Nominations for non-assessed candidates, where farmers can stand as for the board with the support of 35 different shareholders, close at noon tomorrow.