Fonterra holds milk payout, amid doubts over market rebound

Fonterra underlined doubts over the revival in dairy values, flagging "significant volatility" in the market, as the co-operative kept at an eight-year low its forecast for the price it will farmers for milk.
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The New Zealand-based dairy giant kept at NZ$4.70 per kilogramme of milk solids its forecast for its milk price in 2014-15, which ends in May, despite acknowledging a sharp recovery in dairy values since it last reviewed the payout, in December.
Whole milk powder prices have soared 45% at GlobalDairyTrade, the benchmark physical auction run by Fonterra, with skim milk powder prices up 13%.
John Wilson, the Fonterra chairman, said that although dairy commodity values had risen «the increase was not sufficient» to prompt an upgrade to the farmgate milk price.
«There continues to be significant volatility in international commodity prices,» he said.
‘China sidelined’
Mr Wilson acknowledged that there was «continued uncertainty in milk production» in New Zealand, the top milk exporting country, thanks to drought in many areas.
However, the flat milk price forecast was in line with guidance he gave to a farmers’ meeting last week in Taupo, in New Zealand’s North Island, that GlobalDairyTrade values had merely returned to levels needed to sustain a price forecast of NZ$4.70 per kilogramme of milk solids.
Meanwhile, other commentators too have remained cautious over the dairy price revival.
Rabobank this week said that «global supply is still relatively strong in most key export regions», although acknowledging that «production growth is now slowing».
And China, the top dairy importer, «remains mostly sidelined by the market» thanks to slowing growth in domestic demand.
«A major recovery in global commodity markets is still a few months away», the bank said.
 
Source: Agrimoney
 

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