Fonterra Maintains Milk Price Forecast Amid Middle East Supply Chain Challenges
Fonterra, a leading dairy co-operative, has confirmed its farmgate milk price forecast at $9.70 per kilogram of milk solids (kgMS), maintaining confidence despite global shipping challenges. Chief Executive Miles Hurrell stated that the forecast is supported by a well-contracted sales book and stronger global dairy prices observed in February and March. The co-operative has also adjusted its earnings guidance fr om containment operations to a range of 50 to 65 cents per share. This adjustment considers the potential impact of the Middle East conflict on sales volumes in the second half of the year.
Hurrell emphasized that Fonterra is accustomed to navigating supply chain disruptions but remains cautious due to the unpredictable situation in the Middle East. He highlighted the importance of the Gulf states as significant buyers, noting their ongoing demand for dairy products. This demand was evident in the recent Global Dairy Trade (GDT) event, wh ere Gulf states were notable purchasers.
The co-operative leverages its joint venture with Silver Fern Farms and a partnership with Maersk to manage product distribution challenges effectively. This collaboration proved beneficial during the COVID-19 disruptions and continues to be valuable amid current supply chain issues.
Benjamin Picton, RaboResearch's senior market strategist, pointed out that the Strait of Hormuz is largely closed, causing substantial disruption to global supplies, including oil, refined fuels, and other critical goods. This situation affects New Zealand's fuel supply, which is now entirely imported following the 2022 closure of the Marsden Point refinery. Consequently, the upstream supply chain for New Zealand's liquid fuels is under severe strain.
Despite these challenges, Waikato Federated Farmers dairy chair Matthew Zonderop expressed a pragmatic outlook, acknowledging the concerns but emphasizing the necessity for farmers to continue their operations as usual.
