Fonterra farmers should go into the new dairy season with confidence because the outlook for global milk supply is constrained for the next six months or so, says the dairy giant’s chairman, John Wilson.But Wilson has criticised a recent Westpac Bank report suggesting the surge in world dairy prices could more than offset the costs of lost milk New Zealand production due to this summer’s drought, and even push farm incomes up to $300 million higher.
He said the suggestion showed a «lack of knowledge» of the dairy sector.
Wilson said even though recent international milk powder prices had been up to US$5500 per tonne, they were spot prices, and prior to Christmas and a tight world milk supply, prices had been south of US$3000.
Drought could have carved up to 2 per cent off this current season’s milk production compared to last year, Wilson said.
But it was «remarkable» that at the end of January milk production had been 6 per cent ahead of last season, which had been a bumper season.
As Fonterra, which collects nearly 90 per cent of New Zealand’s raw milk and is the world’s biggest dairy exporter, starts selling product into world markets in September, milk powder prices could be expected to ease to around US$4500, but overall farmers could be confident about the outlook for next season, Wilson said.
Payout will next be reviewed next month, although even then Fonterra experts were still making judgments for 15 months ahead, he said.
The «absolute best estimate» for payout for this 2012-13 season was still $5.80/kg milksolids, Wilson said.
The new season officially starts on June 1, although it is August before milk really starts to flow.
The construction site for Fonterra’s new Waitoa plant was blessed yesterday. Prime Minister John Key attended..
The new plant will have five ultra heat treatment lines processing a range of products, including UHT white milk and cream for the food-service sector – a business that generates more than $1 billion in sales a year.
Most of the product will head to Asia.
Key was also given a private tour of the wider Fonterra Waitoa plant and met staff.
Source:Â Stuff