Plummeting global dairy prices costing farmers billions are bottoming out, dairy giant Fonterra says, but don't hold your breath for relief this year. The world's biggest dairy exporter yesterday dropped its forecast payout to farmers this season by 90c to $5.10 per kg of milksolids. This season's payout could represent a drop worth about $3.3 billion from last season's record available payout of $7.90 per kg - of which 24c was retained to protect the balance sheet. The average price of whole milk powder in Fonterra's online auction has dropped 54% since July, while the ANZ Commodity Price Index for dairy products has fallen by about half since peaking in November 2007. Kelvin Wickham, Fonterra managing director globalTrade, said current prices were nearing the bottom of the cycle."If you look at where we are today what we're saying is we're heading towards the bottom now, the signs are the supply is buttoning off, demand is picking up but we're not going to come out of that until 2010," he said. Criticism that Fonterra's online auction system was helping drive down prices was absolute nonsense, Ferrier said. "If you look overall, all soft commodities and most hard commodities have been falling materially since late 2007," he said. "Dairy is no different than anybody else." "In the current tough economic climate, combined with the re-introduction of subsidies [in the EU], it could be well into 2010 before prices rebound." Fonterra said the value add part of the forecast payout had increased by 5c to 45c because of improved margins in its international ingredients and overseas consumer businesses.
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