Fonterra Co-operative Group Ltd, the world’s largest exporter of milk products, reduced its farmgate milk price forecast because challenging global economic conditions were impacting demand for dairy.
It said in a statement that farmgate milk price for the 2015/16 were expected to be NZ$4.15/kgMS, down from NZ$4.60 in the previous season.
“Key factors driving dairy demand are declining international oil prices which have weakened the spending power of countries reliant on oil revenues, economic uncertainty in developing economies and a slow recovery of dairy imports into China. In addition, the Russian ban on European Union dairy imports continues to push more product on to the world market,” Chairman John Wilson said
He said there was still an imbalance between supply and demand, which continues to put pressure on global milk prices. Since last September, prices on GlobalDairyTrade for whole milk powder (WMP) have fallen 12 per cent, and skim milk powder (SMP) prices are down 8 per cent.
“Although New Zealand farmers have responded to lower global prices by reducing supply, that has yet to happen in other regions, including Europe, where milk volumes have continued to increase,” Wilson added.
Chief Executive Theo Spierings said while global demand remained sluggish, Fonterra supported the general view that dairy prices will improve later this calendar year.
“However the time frame for supply and demand rebalancing has moved further out and largely depends on a downward correction in EU supply in response to the lower global prices. These prices are clearly unsustainably low for farmers globally and cannot continue in the longer term.”