While Fonterra today lowered the midpoint of its predicted farmgate milk price for the previous season, there’s a sign of confidence for dairy farmers amid the pandemic as prices look to lift in 2021.
The forecast midpoint, which is used to pay farmers, was dropped by five cents to $7.15 for the 2019/20 season.
However, the 2020/21 season is set to lift to $6.40, up from a predicted $6.25 earlier. The revision is set to put an extra $11 billion into the pockets of farmers.
The dairy co-operative said the lift was down to dairy consumption recovering in China. However, other markets were harder to pick.
“There's still some challenging areas,” managing director of co-operative affairs Mike Cronin said.
He said markets in Chile, South East Asia, the US and Europe still faced challenges.
“We're just hoping we can see that through this season.”
Fonterra Chairman John Monaghan said the prices were helped by the strengthening New Zealand dollar versus the US dollar over the past two months.
“The EU and US Governments’ support measures for farmers are holding up milk production and dairy commodity prices despite the disruption they have experienced so far from Covid-19,” he said.
“While we expect these support measures to end at some point, it is likely they will continue through the peak of the New Zealand season.”
He said while there was still a “high level of uncertainty” in global markets, levels of risk were lowering.
“Milk supply from the EU, US and Latin America is increasing despite the impact of Covid-19.
“There continues to be uncertainty around how the global recession and the potential for a second wave of Covid-19 globally could impact demand.”
Ms Monaghan advised farmers to budget with caution due to the uncertainty.
The co-operative will finalise its 2019/20 farmgate milk price in September as part of its annual result.
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