3 NZX dairy stocks to watch amid rising food prices

By - Manika


  • Global dairy prices rise in the global dairy auction.
  • The price of whole milk powder was up 5.1%.
  • Prices of butter, cheese and skim milk also rose in the auction

Dairy prices have risen in New Zealand recently and according to a press release by A2Milk (NZX:ATM), high demand and supply tracking below-average levels have led to a rise in global dairy prices. Milk production all over the world has been impacted by the high cost of feed, which is likely to continue for some time.

A2M's release added that in New Zealand, the ongoing weather conditions have impacted grass-growing conditions. The demand-supply mismatch is cited as the main reason, while the demand has been pretty steady, the supply has dropped.

Analysts said that dairy prices will remain elevated for some more time.  

Even in the latest Global auction held on 7 September, the price rose 4.9% to US$4001 per tonne. The price of whole milk powder, which strongly influences payouts to local farmers, rose 5.1% to US$3310 per tonne. Prices for other products, including butter, cheddar, and skim milk powder also increased, according to the company.

Against this background, let’s see how dairy stocks are performing.

 A2 Milk Company (NZX:ATM) 

A2 Milk Company is a popular NZ-based milk company.  In its results announced on 29 August, the company reported EBITDA growth of 59%, and the Net profit after tax was up 42.3%.

According to the results released by the company on the NZX, the performance in FY22 was driven by its new strategy which was focused on tapping the full potential of China’s market.

On 14 September, the company was trading down 2.06% to NZ$6.180, at the time of writing.

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Fonterra Cooperative Group (NZX:FCG)  

FCG, the biggest dairy exporter of New Zealand, raised its forecast for FY23 to 45-60 cps. This is up from 30 to 45 cps. The company released a statement on 9 September and said that this increased forecast was made possible due to the ongoing increase in demand for dairy.

The company lowered its projections for collections for the 2022/2023 season to 1,495 KgMS, down from 1,510 kgMS, due to unfavourable weather conditions.

According to the release, this was made possible due to the ongoing increase in demand for dairy. However, the Company lowered its forecast for milk collections for the 2022/2023 season to 1,495 KgMS, down from 1,510 kgMS due to weather conditions.

On 14 September, the stock was trading down 1.41% at NZ$3.500, at the time of writing.

Synait Milk Company (NZX:SML)

Synlait Milk is another NZ-based milk company. Recently, it announced that its director, sustainability, brand, and beverages, Hamish Reid, would quit the Company. Earlier, SML had increased its forecast for milk prices to NZ$9.50 kgMS from 9.00 kgMS for the 2022/2023 season.

On 14 September, the stock was trading down 2.16% at NZ$3.360, at the time of writing.

Bottom Line: The overall food prices are the highest in New Zealand. Food prices are up 8.3% and the biggest price jumps have been seen in items like tomatoes, cheese and yoghurt. Dairy has seen big jumps, and accordingly, the dairy companies have lifted their earnings forecasts for FY23