Fonterra announcing an 8 percent decrease in the farmgate milk price for this season and reduced the opening forecast for the 2012-13 milk year which begins June 1st. The New Zealand cooperative says the Global Dairy Trade Index has declined 20.3 percent since their April forecast citing strong production in Europe and the U.S. Milk production is also up in New Zealand and Australia. Fonterra Chairman Sir Henry van der Heyden says “There’s a lot of milk out there and prices have softened.”
The price reduction is actually less than had been expected reflecting a lower New Zealand currency, strong demand from China and some thoughts the world dairy market may recover later this year and into 2013.
Not only is Fonterra the largest dairy exporter in the world, it is also one of the largest companies in New Zealand accounting for 7 percent of GDP. Estimates are the reduction will take $500 million ($380.4 million U.S.) out of the country’s $200 billion ($152.16 billion U.S.) economy.