NZ's Fonterra cuts milk collection, price outlook for 2022/23

Weak demand cited as the cause
calendar icon 24 February 2023
clock icon 1 minute read

New Zealand's Fonterra Co-operative Group Ltd on Friday slashed its farmgate milk price range forecast for the third time, and lowered its milk collection outlook for the 2022/23 season on account of softening demand and adverse weather conditions, reported Reuters.

The world's biggest dairy exporter now expects to pay farmers for milk supply between NZ$8.20 and NZ$8.80 per kilogram of milk solid (kgMS), compared to an earlier estimate of NZ$8.50 to NZ$9.50 per kgMS. 

"Demand for whole milk powder, particularly from Greater China, has been soft with prices down around 5% since the beginning of December," said Chief Executive Officer Miles Hurrell.

On milk production, Hurrell said headwinds from cyclone Gabrielle and dry conditions in the country's South Island were impacting co-operative's full season aspirations.

For the 2022/23 season, Fonterra now expects milk collection at 1,465 million kgMS, down from its previous forecast of 1,480 million kgMS. The group recorded milk collection of 1,478 million kgMS for the year ended July 31, 2022.

Peer a2 Milk Co, during its earnings show on Monday, also flagged "increasingly challenging" headwinds in the China infant milk formula market which are likely to continue on account of declining birth rates in Asia's largest economy.

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