Blow for farmers as Fonterra drops forecast milk payout

Fonterra has dropped its forecast payout to farmers again, blaming the current strong global supply of milk.

The co-op has revised its 2018/19 forecast Farmgate Milk Price from $6.75 per kgMS to a range of $6.25-$6.50 per kgMS.

It has also increased forecast New Zealand milk collection volumes by 1.3 percent to 1,550 million kgMS.

Fonterra Chief Executive, Miles Hurrell, said the change in the forecast was due to a stronger global milk supply relative to demand at this time.

"I know how hard it is for farmers when the forecast Farmgate Milk Price drops, but it's important they have the most up-to-date picture so they can make the best decisions for their farming businesses," he said.

Mr Hurrell said there is still strong production coming from Europe, US and Argentina, and the New Zealand season is off to a positive start, due to good weather and early calving in the South Island. 

"As a result, we have increased our forecast milk collections for the year to 1,550 million kgMS  up from 1,525 million kgMS."

He said global demand is not matching current increases in supply.

"At recent Global Dairy Trade (GDT) events, prices for all products that make up the milk price have fallen. Demand for WMP, in particular, continues to grow in China, and it remains strong across South East Asia, but it simply isn't matching current levels of supply."

The global market place is reminding farmers about the volatilty of global marketplace saying it is very difficult to pinpoint an exact forecast this early in the season. 

"For example, weather conditions can change suddenly and this can have a significant impact on the global milk supply," Mr Hurrell said.

"We therefore recommend farmers budget with ongoing caution."