Fonterra raises lower-end of 2020/21 forecast farmgate milk price as China demand improves

[BENGALURU] New Zealand dairy giant Fonterra raised the lower end of its farmgate milk price forecast range on Friday for the upcoming season as demand picks up in China, its top market.

Fonterra narrowed the range to NZ$5.90 (S$5.40) to NZ$6.90 (S$6.30) per kg of milk solids (kgMS) for the 2020/21 season from the previous range of NZ$5.40 to NZ$6.90.

"After an initial shock due to Covid-19, dairy consumption in China is recovering with more people spending on food," Fonterra Chairman John Monaghan said in a statement.

He added that while there was still a high level of uncertainty in global markets, the declining level of risk supported its decision to lift the lower end of the price range.

Fonterra also narrowed the price range for the 2019/2020 season to NZ$7.10 to NZ$7.20 per kgMS from NZ$7.10 to NZ$7.30.

A second wave of infections could hit demand, however, Mr Monaghan warned. The first wave and subsequent global lockdowns forced the dairy exporter to slash the price it pays farmers for dairy in May.

Support measures for farmers in the United States and European Union that have helped support prices during the demand hit will likely continue through the peak of the New Zealand season, Mr Monaghan said.

REUTERS