The Country 13/07/26: Richard Allen talks to Jamie Mackay

Fonterra’s chief executive says the co-operative has cut 50c from its forecast farmgate milk price as it battles “softer-than-expected” demand and strong global supply.

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Episode Transcript

Speaker 1 (00:00):
It is today's big news story, and I would describe
it as disappointing but not surprising. To tell us more,
the chief executive of Fonterra, Richard Allen, you came out
this morning, Richard, the co op cut fifty cents from
its forecast milk price as a battles softer than expected
demand and strong global supply. Good afternoon. You're relatively new

(00:22):
in the job. You've got a bit of a hospital
pass having to deliver this one, Richard.

Speaker 2 (00:27):
Good Jammy, thanks for having me on. Look, yeah, it's
never great having to reduce the milk price, but we
have seen softness over the last few judt's from when
we came out in May with the evening forecast, I
think we've seen around about eleven percent decline across kind
of the key products to go into the milk price.
So really important we get the signal out there. We

(00:49):
went out with a wide range to begin with. We
knew the world was pretty uncertain and prettyvollatile, and we're
starting to see a little bit of that play through.

Speaker 1 (00:55):
Absolutely. So those GDT prices have fallen eleven percent across
the reference products since late May, so that's a drop
that you couldn't ignore.

Speaker 2 (01:07):
That's exactly right. And you know, getting a signal out
there is an important time of year on farm farmers
making decisions around around the rest of the season, So
get that signal out there and let our farmers get
onto them.

Speaker 1 (01:19):
We're expecting a stronger than average, if I can use
that word start to the season. We finished last season
with the wet sal didn't we milk production up? What
for in a bit percent or something like that. It's
looking good for a promising start, but there are a
couple of dark clouds on the horizon. The super al
Nino here in Australasia would be one, and obviously even

(01:42):
with what's happening in the Northern Hemisphere at the moment,
this heat wave, and you don't want to benefit from
another dairy farmer's misfortune. But could that eventually play into
the hands of New Zealand farmers.

Speaker 2 (01:56):
Yeah, I think time will tell. But the heat is
definitely started and I wouldn't say it's dropping them, but
it's certainly slowing the growth, particularly particularly in Europe, but
even in part of the US. I think here in
New Zealand year we had a bumper season.

Speaker 1 (02:09):
Last year.

Speaker 2 (02:10):
We expect that to continue into this year. A lot
of talk around the potential impacts of the Super Nino.
I know our farmers are pretty well prepared, and you
know there's pretty good on farm feed around. So look,
I'm sure they're all preparing for it. But we'll see
how the season plays up.

Speaker 1 (02:29):
Do you suspect that this signal you're sending now by
reducing the forecast milk price by fifty cents will encourage
perhaps farmers to change their farming practices my words, not yours.
Maybe use a bit less supplement.

Speaker 2 (02:44):
No, I don't.

Speaker 1 (02:45):
Look.

Speaker 2 (02:45):
Again, it's up to our farmers as to you know,
what they do and the decision they make on their farm.
I think you know, our job is to get out
there and maximize the value for their milk. And at
the moment, you know, the demand has their milk. The
softest supplace has been a little bit up. But think
you know, generally nine twenty five is still not a
bad number. We just got to get up there and
deliver it.

Speaker 1 (03:04):
Hey, I think about this time, about a year ago,
it might not have quite been a year ago. One stage,
we were staring down the barrel of a payout that
was going to begin with an eight, so things can
change quickly, and.

Speaker 2 (03:17):
That's exactly right, Jamie. I mean we're so early into
the season and you know there will be twists and
turns from here. We know that we are particularly you know,
the forecast is really susceptible to changes in price right now,
and so this is where we see it today. But
as you say, things can conturn pretty quickly, and again

(03:38):
we'll have to watch and see what comes with this season.

Speaker 1 (03:41):
Richard Allen with a chief executive of fon Terra. You've
been in the job now for a couple of months.
You had very big shoes or to use dairy farming
terminology gum boots to fill replacing Miles Hurrel. How are
you finding the job?

Speaker 2 (03:55):
It's great, Damie. I mean, this is you know, it's
a real privilege to have this opportunity. We've got a
great team, we've got you know, a great set of products,
and we've got two great businesses in our food service
and ingredients business out there in the market. So look,
no shortage of challenges if you look what's happening in
the world, and you know we're pretty good at navigating those.
But as I said, it's a it's a great team,

(04:16):
it's a great co op and yeah, just looking looking
forward to delivering for the farms.

Speaker 1 (04:21):
Life would be a lot easier if people in other
parts of the world would mind their own business.

Speaker 2 (04:27):
Life would be a lot easier, James, for sure. But
I think you know, we hope to that. We certainly
don't plan for that. And yeah, you know, our job
is to take what's throwing at us and get out
there and maximize value for our farmers.

Speaker 1 (04:39):
Wow, there's a protein boom on out there and we
are the best at converting grass to proteins. So the
future as good, but there will always be ups and downs.
Richard Allen, Chief Executive a Fonterra. Thanks for your time.

Speaker 2 (04:49):
Thanks Jamie,