John Stevenson: Fonterra Co-Operative Council Chair on farmgate milk prices forecast to hit between $9.50 and $10
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What are the farmgate milk price forecasts for the upcoming season?
The dairy train rolls on of Rabobanker, right? They think the 26-27 season looks promising. Milk price between $9.50 and $10. They reckon the current season wraps up shortly, of course. That's going to be the biggest one on record. John Stevenson is the Fonterra Cooperative Council Chair and is back with us. Now, how long have you been around in the industry and where do these current times sit? I mean, are we in historic times?
I certainly think so. In terms of returns, Mike, there's no doubt that it's a... It's a good time. We've seen strong milk prices. We've also, for Fonterra Farm, have seen strong returns on our shares. The thing to look out for, though, is the input costs, which are continuing to creep up.
So you cover all of those things that Rabo does. Now, would you agree with Rabo going forward? 9.50, 10 feels about right-ish as we sit here this late May morning?
Certainly, looking at everything out there, future of the trading around 9.70, 9.80 for next year, that's That seems about right, but hey look, the Fonterra boards make the decision on that. They have a lot more information than us, so we'll leave that to them on Thursday.
How do rising input costs impact dairy farmers' profits?
That money you mentioned with the dividends and the sell-off and stuff, where is that money? Is that in the bank? Is it at the pub? Is it at the farm store? What's happening with it?
We start pretty early in the morning, Mike, so it's not at the pub, I can tell you that, but it's certainly a lot of people I feel are sitting on it at the moment. There's a few that are sitting in bank accounts and And things, you know, input costs like fertiliser in particular, 30% of that goes through the Strait of Hormuz and we're seeing DAP and urea up above 20% on last year. So that's certainly got people sitting on their hands a little bit.
I was going to say, how worried are you if you, you know, if you say a deal will be done and the Strait will open, is there a chunky period of time where things are going to be a bit problematic supply chain-wise?
That's what we're hearing, certainly on the fertiliser side of things as well. I think there'll be some tail on that. I know of farmers, particularly cropping farmers, that do supply our dairy industry, a lot of them have stored furt and sheds in anticipation of either supply or price challenges in the spring.
OK, and as far as the Rabo report goes, they're saying these numbers are correct at $9.50 to $10. Their words, highly profitable. Is that what it feels like?
Certainly, like the dairy NZ break-even milk price at the moment is at $8.36. I'd expect that to creep up a bit, but, you know, there's still a decent margin in there, which, you know, is really good for farmers as they look to invest in technology, improve their efficiency and all that sort of thing. One of the most efficient dairy industries in the world. But if we stand still, we go backwards. So farmers are pretty motivated to improve that, Mike.
Good stuff, John. Always good to catch up. Appreciate it very much.
John Stevenson, who's the Pontera Cooperative Council Chair with us this morning.
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