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Fonterra raises milk price forecast to $6.10/kg, citing global demand, rising prices

Tuesday 27th April 2010

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Fonterra Cooperative Group, the world’s biggest dairy exporter, raised its forecast milk price for 2009/10 by 7%, citing rising global dairy prices and demand begins to outstrip supply.

The cooperative expects to pay its farmer-suppliers $6.10 a kilogram of milk solids in the year ending May 31, up from its previous estimate of $5.70, it said in a statement today.

“The global supply/demand balance for dairy products has shifted to a slight supply deficit,” said chairman Henry van der Heyden.

“Demand from Middle East/North Africa and Asian markets continues to grow.”

At the same time, global milk production has continued to slow, he said.The increase may be bittersweet news for North Island farmers, who are drying off in large numbers as drought withers grass supply. That means any price gains will be offset by dwindling production.

“Many farmers, especially those north of Taupo, are suffering from worsening drought conditions,” van der Heyden said. “We recognise that the weather has made it very difficult for many farmers going into the winter.”

Fonterra, which will make a more formal forecast at the end of May, said its farmers should assume a similar payment for 2011.

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