28 Aug 2013

Milk demand outweighs contamination worries

10:14 am on 28 August 2013

The battering Fonterra has taken on contamination issues, ranging from botulism scares to DCD chemical claims seemingly has not tainted demand for its products.

The dairy co-operative has announced the second increase in its forecast payment to farmers in a month, based on continuing strong global demand for dairy commodities and prices.

The latest increase lifts the farmgate milk price by a further 30 cents to $7.80 a kilo of milk solids, with a 32 cents a kilo dividend on top of that, making a total forecast payment of $8.12.

If that stands it will exceed Fonterra's previous record payment of $7.90 for the 2010 to 2011 season.

Fonterra says the timing of the latest announcement is due to the requirement under the Dairy Act to consider its farmgate milk price every quarter.

But chairman John Wilson said the increased payment reflects the view that international dairy prices will stay at high for longer than previously forecast.

Fonterra said it had achieved record sales and revenue from its two August Global Dairy Trade auctions.

Chairman of the farmer shareholders council Ian Brown said it puts the furore over contamination issues into perspective.

He says the price reflects a demand-driven market.

But he said prices are volatile and could go the other way.

Mr Brown said the price increase caps the excellent late winter and early spring conditions dairy farmers have enjoyed for the start of the new production season.

Figures from DairyNZ show total milk production for the season so far is up around 3% and national milk collection for August is up by about 9% compared with the same month last year.

Waikato, Bay of Plenty, Taranaki and Canterbury are all experiencing excellent August conditions.

Federated Farmers dairy chair Willy Leferink said the payment lift is a stunning end to what's been a hellishly tough roller-coast month for Fonterra.