21 Jul 2015

Fonterra's prices likely to drop - AgriHQ

8:07 am on 21 July 2015

An AgriHQ dairy analyst expects Fonterra will lower its forecast milk payout for this season following the recent plunge in international dairy prices.

The price of whole milk powder plummeted by 13.1 percent at last week's Global Dairy Trade (GDT) auction.

AgriHQ's weekly market report showed many dairy products on the global dairy trade auction did not increase from their opening price levels, which Fonterra normally sets 15 percent below the previous auction price.

Analyst Susan Kilsby said Fonterra's forecast payout of $5.25 will most likely have to be reduced.

"Milk powder is certainly at the lowest level that we've seen in the history of the GDT.

"GDT was initiated back in July 2008, and if we look outside the auction, prices are at their lowest level in more than a decade, and at the farmgate level, we're certainly seeing a lot of pressure on pricing there after the auction.

"We revised the AgriHQ farmgate milk price for the 2015-16 season down to $4.22. That compares with Fonterra's current forecast of $5.25, so we are expecting Fonterra will be revising that price down."

Fonterra will be considering its milk price forecast at its next board meeting in early August.

Get the new RNZ app

for ad-free news and current affairs