Fonterra Co-operative Group has raised this season’s milk price once again, as the global dairy market braces for uncertainty amongst shifting demand. Maxum Foods’ Global Dairy Commodity update gives some insight into how Australia and New Zealand will move forward.
The midpoint of the 2024/25 season forecast Farmgate Milk Price has been lifted from $9.00 per kgMS to $9.50 per kgMS. The co-op also announced a narrowing of the forecast range, from $8.25 - $9.75 per kgMS to $9.00 - $10.00 per kgMS, reflecting the fact that more of the FY25 sales book has been contracted since the last forecast Farmgate Milk Price update in September.
Fonterra CEO, Miles Hurrell, said the improved outlook has largely been driven by strong demand for reference commodity products, which has helped to push prices up in recent Global Dairy Trade auctions.
“This demand has been seen out of China, where there are indications that domestic production is below expectations, and also in Africa, the Middle East and Southeast Asia,” says Mr Hurrell.
“Looking ahead, we’ll closely monitor any factors that could have an impact on supply and demand. This would include any significant change to milk supply in New Zealand over the second part of the season which could lead to pressure on global milk prices.
“We’ll also continue to utilise our scale and flexibility when it comes to optimising our product mix, including putting more of our farmers’ milk into the higher returning products to capture the value from every drop.”
Impacts of shifting dairy demand
Maxum Foods released its Global Dairy Commodity update this week, giving an overview of the shifting landscape. The company stated EU butterfat shortages continue to drive market tightness, while evolving geopolitical tensions, seasonal shifts, and varying global milk output signal a complex road ahead.
Australian dairy exports have grown YOY since December last year, reflecting stronger milk supplies and led by cheese, milk powders and fats. August shipments featured increases across all major commodity products, except dry whey and milk and cream.
Stronger New Zealand milk output and weak global whole milk powder (WMP) demand will sustain elevated skim milk powder (SMP) and butterfat output, although the report stated avoidance of commodity powder production will be a priority. Full-season growth is heavily weather-dependent, but high milk prices and abundant feed supplies will spur producer confidence.
The report stated the EU remains the strongest influence on the global market, with the ongoing tight butterfat market. High EU prices are attracting New Zealand anhydrous milk fat (AMF) imports but the impact of these is unclear, according to Maxum.
Oceania cheese prices will come under pressure as more intense export competition looms – as the US cheddar supply is increasing at a faster rate than domestic demand.
New Zealand cheese output will also lift, reducing exposure to milk powders. EU cheese values are strongly driven by the butterfat market – while cheese prices are expected to ease with easing butterfat values, increased exports will be critical to the cheese market balance.
Rabobank’s dairy report in September stated that both demand for and production of milk are expected to decline in China, as economic pressure on farms mount in the face of tumbling Chinese farmgate milk prices.
Maxum’s update reiterated this, stating China’s efforts to stimulate spending and rebalance the dairy supply chain will be interesting to watch for the potential impact on ingredient imports, which remain well down year-on-year.
