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Fonterra Raises Forecast for Organic Milk Prices Amidst Strong Customer Demand

Australia 27.02.2024
Source: The DairyNews
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Fonterra, a leading dairy cooperative, has revised its forecast for organic milk prices due to sustained growth in customer demand, particularly from the United States and the United Kingdom. The forecast for organic milk prices has been raised from $9.55/kg milk solids to $9.85/kg MS, expanding the revised range to $9.35-$10.35/kg MS, up from $9.05-$10.05/kg MS.
Fonterra Raises Forecast for Organic Milk Prices Amidst Strong Customer Demand
Almost 90% of Fonterra's sales are now contracted in the United States and the United Kingdom, reflecting robust demand in these markets. Fonterra Organics, comprising 110 organic farms throughout the North Island, has become a key player in meeting the growing demand for organic dairy products.

Speaking at a field day at Pāmu’s organic dairy farm Earnslaw, just north of Taupō, Stuart Luxton, Fonterra Organics business relationship manager, described the program as a "small co-operative within the embrace of a much larger co-operative." The organic milk is processed at Morrinsville, Hautapu, and Waitoa, with transport being the largest expense.

Andrew Henderson, Fonterra's general manager of organics, noted that organic milk solid growth has doubled from 2020 to 2023/2024. The products, including Mainland organic cheese and butter, Kāpiti Mature Cheddar, Anchor Blue Milk, and NZMP Ingredients, are exported to 13 different countries, each with unique certification criteria.

While rising living costs have impacted organic sales, consumer demand for sustainable and health-conscious products influenced by the COVID-19 pandemic has offset these challenges. Anna Maginness, Fonterra's market development manager for organics, highlighted that the global organic dairy market is valued at around US$24 billion, growing approximately 5% annually. Despite this growth, it remains a niche premium offering compared to the global conventional dairy market, which stands at US$570 billion.

Fonterra's major markets for organic products include the US and China. In the US, the organic product range spans powders, beverages, infant formula ingredients, butter, and cheese. In China, Fonterra's Anchor-branded milk has experienced significant growth, particularly in infant formula and UHT milk categories. The organic dairy market is anticipated to reach around US$50 billion by 2030, representing substantial growth potential in the coming years.
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