Fonterra's Conservative Forecast Signals Another Tight Year for Dairy Farmers
Source: The DairyNews
Fonterra’s recently announced opening forecast for the new season, setting the midpoint at $8/kg MS, indicates continued financial caution for dairy farmers. This forecast, ranging from $7.25 to $8.75/kg MS, was shared during a financial update on May 29 and aligns closely with market expectations.
Bart van de Ven, a sharemilker from Springdale, Waikato, interprets this forecast as yet another signal for stringent budgeting: “With our low-cost system, we break even at $6/kg MS, so $8/kg MS is manageable. However, it still means tightening our belts further,” he explained. Van de Ven pointed out that his primary expense, fertilizer, hasn’t increased over the past year, giving him a slight edge. Yet, he acknowledges that farmers with higher operational costs might find the season challenging.
Richard McIntyre, chair of Federated Farmers dairy section, remains optimistic, suggesting that many farmers could turn a profit if the $8/kg MS holds true and possibly increases as some analysts expect.
Mark Storey, DairyNZ's head of economics, noted that this marks the fifth consecutive season with milk prices above $7/kg MS. However, high operational expenses continue to squeeze budgets. DairyNZ’s Econ Tracker indicates an average breakeven point of $7.76/kg MS for the upcoming season, expected to rise near $8/kg MS. “It’s a tight scenario, with little room for discretionary spending and significant pressure on cash flows,” Storey elaborated.
Richard McIntyre, chair of Federated Farmers dairy section, remains optimistic, suggesting that many farmers could turn a profit if the $8/kg MS holds true and possibly increases as some analysts expect.
Mark Storey, DairyNZ's head of economics, noted that this marks the fifth consecutive season with milk prices above $7/kg MS. However, high operational expenses continue to squeeze budgets. DairyNZ’s Econ Tracker indicates an average breakeven point of $7.76/kg MS for the upcoming season, expected to rise near $8/kg MS. “It’s a tight scenario, with little room for discretionary spending and significant pressure on cash flows,” Storey elaborated.
