According to New Zealand news source, the National Business Review (NBR), Bank of New Zealand (BNZ) cut its forecast amid continued weakness in international dairy prices. The Bank reduced its forecast by 50c to $4.50/kg of milk solids. This pushes it below Fonterra's current projection of a payout of $4.60/kg of milk solids.
NBR said Fonterra is due to review its forecast by early December as part of government regulations.
According to NZX whole milk powder futures, whole milk powder prices, key to Fonterra's payout, are due to decline by about 3% at next week's Global Dairy Trade Auction. The last auction on 3 November saw a 7.4% drop in prices across all dairy products, with whole milk powder dropping by as much as 8%.
According to NBR, Doug Steel, senior economist at BNZ said "international dairy prices have come under renewed downward pressure over recent weeks. Near term indicators are extremely weak. This seems associated with developments in the EU."
Steel said that EU developments have put downward pressure on world dairy prices: "It compounds the already negative influence of more EU milk supply associated with the removal of production quotas earlier in 2015 and the continuing Russian ban on EU (and US) dairy imports."
Speaking to the Irish Farmers Journal at the opening of Glanbia's new UHT plant in Co Monaghan last week, Henry Corbally, Glanbia chairman, said liquid milk farmers in Ireland have not been insulated against the difficult dairy market. "The downturn in the markets has been reflected in the consumer price and in the farmer's own income levels," Corbally said.
Related stories
Fonterra's Australian business should return a profit next year
Europe not much of a dairy threat, says NZ agriculture miniser
SHARING OPTIONS