No respite for consumers as dairy prices continue to rise

January 20, 2021 03:30 PM AEDT | By Kunal Sawhney

No respite for consumers as dairy prices continue to rise

Fonterra raised farmgate mid prices in December 2020

On December 4, Fonterra Co-operative Group Limited narrowed its estimated Farmgate Milk price range for 2020/2021 and increased the bottom-end of the forecast from $6.30-$7.30 per kgMS to $6.70-$7.30 per kgMS. Subsequently, this implies an increase in the mid point of the range to $7 per kgMS, which farmers are paid off.

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Fonterra CEO Miles Hurrell noted that there had been a robust demand from China particularly for whole milk powder, which is the primary driver of milk prices. However, the Group would remain vigilant on the rising production of milk in Northern Hemisphere as COVID-19 continues to impact globally.

Economists take on surging dairy prices

Westpac Senior Agri-economist Nathan Penny stated that coronavirus was in the rear view for dairy markets after looking at the price surge in the latest global dairy trade auction.

DO READ: Dairy Companies Eye a Good 2021 due to their innovative strategies

He stated that while butter prices had soared by 44%, price of anhydrous milk fat had also gained 38% in the last 4 months, showing a demand surge from China as well as demand return from products consumed in food service chains.

Westpac boosted its 2021 farmgate milk price estimate by 50 cents to $7.50 a kg of milk solids. It also lifted its farmgate milk price forecast for 2022 by 25 cents to $7.25 a kg of milk solids.

Nat Keall, ASB economist stated that all indicators signaled that the demand for dairy prices would persist to sustain well through the end of the season.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

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