News / Blog

Fonterra Chairmen Defends Co-ops Abilities To Predict Global Milk Price
March 26, 2016

Fonterra chairman John Wilson had defended the co-operative’s abilities to forecast the global dairy price, as it comes under pressure for being too optimistic a few months ago.

The company’s interim profit announced this week soared 123 per cent to $409 million for the six months to January 31, meaning struggling dairy farmers can expect a total payout of $4.30 per kilogram of milk solids.

That included an unchanged milk payout forecast of $3.90, which is considered below break-even point.

But Wilson said the events that have created a global milk surplus were not foreseeable.  “This is one of our frustrations, that we are really struggling to predict exactly where global dairy prices are going to go. But I think to be fair, all global commentators are having that challenge. Our other global dairy peers around the world are having that challenge,” he told TV3’s The Nation.

The shocks that had hit the market had added about 4 to 5 billion litres of milk into a global market of 400-450 billion litres of milk but most of the surplus had ended up in the much smaller “traded dairy market”.

“We believe that imbalance is going to correct over the next six months or ago but it’s very difficult to predict the exact timing of it.”

Fonterra had been talking about volatility for some years and had shifted a lot of milk from ingredients into the more lucrative consumer and food service business.  However, Wilson said Fonterra would not be urging dairy farmers not to convert more land into dairying.

“We will see growth continuing in New Zealand but it will slow. I think we have to be very careful about where we convert land but that’s not in Fonterra’s control. In fact, Fonterra’s required to pick up all milk.”  He hoped regulations would changed so Fonterra did not have to give well-heeled dairy competitors an edge.

“The requirement to provide milk to small, innovative domestic companies, we absolutely support that, provided it’s at the right price. But…there’s well capitalised investors arriving in New Zealand today that do not need a hand-up from Fonterra farmers.

“The requirement from our farmers underwrite any potential new milk growth in New Zealand is very expensive for them. It’s time for that to change.”

By: Catherine Harris


Summer 2018