Meanwhile, the midpoint range at which farmers are paid off was lifted from $8.70 per kgMS to $9.20 per kgMS, the highest level since Fonterra was formed over a decade ago. The co-operative’s previous record was $8.40 per kgMS back in the 2013/14 season and last season they paid farmers $7.54 per kgMS.
According to Fonterra, the increase in its forecast is a result of the recent hike in global dairy prices amid a tight milk supply. “The increase is the result of consistent demand for dairy at a time of constrained global milk supply,” Fonterra chief executive Miles Hurrell said. “In general, demand globally remains strong – although, we are seeing this vary across our geographic spread. Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs. It’s a similar supply picture in New Zealand.”
Strong global demand for New Zealand’s top export commodity has enable the economy to remain resilient amid the pandemic, particularly offsetting losses recorded by the tourism industry as a result of border closures. “Dairy, and primary prices more generally, are a very strong positive for the economy at present,” Craig Ebert, a senior economist from BNZ, said in a note following Fonterra’s announcement.
