Chairman of Fonterra John Monaghan advises farmer caution around significant on-farm decisions due to current levels of global uncertainty

Chairman of Fonterra John Monaghan advises farmer caution around significant on-farm decisions due to current levels of global uncertainty

The chairman of giant dairy co-operative Fonterra John Monaghan says farmers should consider the level of global uncertainty and be cautious with significant on-farm decisions.

The message from the Fonterra chairman came in an email circulated by him to Fonterra's farmer shareholders updating the situation around the Covid-19 virus.

He said it was clear that the virus would continue to have an impact on the health and wellbeing of people and economies across the globe for an extended period, likely deep into 2021.

"The global recession will impact people’s purchasing power and that will be reflected in prices for all products and services. The scale of the impact is impossible for economists to predict right now."

Monaghan said as a food producer of New Zealand dairy, Fonterra was better placed than a lot of other industries, "but we are still being impacted".

He said Fonterra would be announcing its opening forecast Farmgate Milk Price range for the coming 2020/21 season late next month. And while he gave no indication of what it would be he did sound a cautionary note.

He referenced media coverage of our EU and US producers pouring their milk down the drain due to the impact of Covid-19 on their supply chains.

The US are the world’s second largest milk producer and their milk volumes were forecast to be up by as much as 2% year-on-year, he said.

Milk supply in Latin America, the UK and EU is also expected to be up on last year, with good growing conditions for UK and EU farmers as they went into their spring peak.

"This is likely to disrupt the global supply/demand balance that has supported solid milk prices in the 2019/20 season," Monaghan said.

"We will be considering the high levels of uncertainty that we are seeing across the world, stronger supply signals from key dairy regions, and the NZ/US exchange rate as we forecast what prices could be more than a year from now."

Monaghan had no update to the forecast milk price range for the current 2019/20 season - which stands at between $7 and $7.60 per kilogram of milk solids. 

"We have already contracted a high percentage of milk sales for the current season and this is helping us manage the impact of Covid-19."  

Ultimately, it was progress containing the virus in Fonterra's key overseas markets that would affect the co-operative's performance.

"Key amongst those markets is China. That economy is slowly returning to a new normal.

"Chinese bidders returned to the last GlobalDairyTrade auction at levels closer to their historic participation. We are starting to see key foodservice outlets such as Starbucks and McDonald’s re-open their doors in China. While that’s good news, there’s a lot of recovery still needed in that market.

"One of the key strengths of our Co-op is our scale. We export into every region of the world and manufacture a broad range of products. This means that, even in challenging times like this, we can put your milk into the places and products that will deliver as much value as possible."

See here for the full dairy industry payout history and for economists' forecasts.

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13 Comments

Good to see Fonterra and NZ's primary industry remain intact during this time.

A recovering China will do only good to NZ.

Go China.

Go NZ.

China (CCP) has no friends. It tries to buy friends but in reality everyone dislikes it.

We have no lasting friends, no lasting enemies, only lasting interests -- Winston Churchill.

US, UK, CAN, AUS and NZ are relatives because of Anglo blood.

And, I wonder apart from these countries being 'friends' to each other based on blood, which ever countries are their 'friends'??

Lol...

Agreed, US UK Canada OZ NZ - all just a F.I.RE based economy;
https://www.scoop.co.nz/stories/HL1507/S00101/the-fire-economy-new-zeala...
https://www.youtube.com/watch?v=MGrBCtOt4Qs

China shall support All of them above, as their land/properties can be procured by CCP hence allowing their people movement, CCP won't invest in any part of the universe 'without' allowing it's people movement. All this Anglo Saxon bullshit axes shall be gone! - as CCP just joined the modern world, first step to ban dog meat consumption, next? will be the exotic animals - so rest assure you NZ, OZ etc. - you'll be safe for choosing CCP for the new spinal back bone for your GDP numbers, Well done to All for putting all your 'productions trust' your lock-down sacrifice shall go unnoticed by the overlord.

China have some hot looking women, might add a few to my portfolio..

i see Fonterra came out and said they will stay in lockdown 4 no matter the decision

Level 3 and 4 is effectively the same in their situation. They are an essential service, so could work in level 4 anyway. All workers should also continue to work from home when possible, so no different. So not sure why they would need to mention it.

China has different values to the Anglo countries you name and those values are not liked or respected by democratic countries . This will not change while the CCP continues to act in an arrogant and bullying manner friends bought will neither last or respect those transactions
.

Yet interestingly NZ only has a free trade agreement with China. It does have the CER with Australia, but then Australia sends back kiwis they don't want.

NZ is able to do the same we seem to have plenty of gangs here oh wait they are not Australians are they . We can repatriate aussie here if we wish Jacinda has admitted that but said she wont c and old be because there are about 10 times as many kiwis in oz as we have aussie.

Bluey team/CCP supported media coded messages, with regard to neoliberal ruling elites of safe job keeping task in NZ; https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=123...
RE production industries, chin up hard work ahead and very mouth watering commission shall reward awaiting for you. Anticipate to keep up the F.I.RE economy flame, your Bright Glitter Message shall eclipse the Doom Gloom Messanger here. CCP is the only strong back bone, here - after the tactical moves to crippling the rest of the planet. No chance of those 194 countries banded together, Everything essentials for them? already been sourced/supplied by China, remember 99% of the world is now made in China, only 1% made by God.

TL;DR

The primary sector always stupidly forgets it is subject to international logistics to enable order fulfilment. This part of the supply chain is going to become very expensive looking ahead. Be warned.