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Fonterra reduces estimated farm gate price

New Zealand dairy giant Fonterra has cut its forecasted farm gate milk price for the current season to $4.70 per kilogram of milk solids (kgms). That is down 60-cents from the previous forecast and represents a $6.1 billion reduction in farm income compared to a year-ago.

The co-op says the price combined with a previously-announced dividend of 25 to 35 cents per share will put the cash price at $4.95 to $5.05 per kgms this season.

North Island dairy company, Open Country Dairy has lowered its forecasted price to between $4.50 and $4.80 per kgms.

Fonterra chairman John Wilson says the 16.9 percent decline in whole milk powder and the 7.7 percent decline in skim milk powder on the Global Dairy Trade auction since September contributed to this latest reduction. Reduced global demand has been pushing GDT prices lower since February.

Fonterra is the largest dairy exporter in the world, the reduction equals 2.7 percent of New Zealand’s gross domestic product. The New Zealand dollar fell a half-cent to 76.6 cents against the U.S. dollar after the announcement.