Fonterra cuts GlobalDairyTrade quantity forecasts

Fonterra Co-operative Group Ltd is significantly reducing its GlobalDairyTrade (GDT) offer quantity forecasts for the next 12 months.

The Co-operative’s forecast offer volumes over the next 12 months for New Zealand products have been decreased by a further 56,045 metric tonnes with a 62,930 metric tonne decrease occurring over the next three months and 6,885 metric tonnes of planned volumes being added back later in the year in anticipation of changing market conditions.

Fonterra Managing Director Global Ingredients, Kelvin Wickham said the changes come in response to current conditions on both the demand and supply sides of the global dairy market.

"In response to current conditions in the global dairy markets, we have further modified our product mix to shift volumes away from base Whole Milk Powder (WMP) and into our other products in our portfolio such as value-add ingredients, consumer and foodservice.

"In terms of our product mix, Fonterra is now selling approximately 70 per cent of its total product via channels other than GDT and as a result we do not expect a material impact on inventories," said Mr Wickham.

From a supply perspective, Fonterra’s reduction of GDT volumes reflects the latest production forecast for the coming season where the Co-operative currently expects its farmers to reduce milk supply by at least two per cent.

This reflects the likely impact of farmers using more traditional practices to manage their farm businesses within the limits of a low payout forecast.

Fonterra said that, despite recent low prices GDT continues to be a credible and transparent mechanism for international price discovery.