New Zealand’s Fonterra FCG.NZ on Friday lowered the price it expects to pay to farmers for milk in fiscal 2023, citing a fall in global dairy prices as inflationary pressures hit demand.
Average international milk prices have declined in recent months, affecting exporters in a country where the dairy sector generates more than 7% of the gross domestic product.
The change reflects “the recent downward trend in global dairy prices, driven by some short-term softening in global demand, and the general impact of inflation on purchasing behaviour,” Chief Executive Officer Miles Hurrel said.
“However, we believe the longer-term outlook for dairy remains positive.”
Fonterra, the world’s biggest dairy exporter, now expects to pay farmers between NZ$8.50 and NZ$10.00 per kilogram of milk solid (kgMS) in the 2022-2023 financial year, down from NZ$8.75 to NZ$10.25 per kgMS previously.
Its current advance payment rate of NZ$5.70 per kgMS, however, remains unchanged.