November 24, 2025 • 5 mins
The chief executive of Fonterra confirms farming’s worst-kept secret - the forecast milk price is now at a midpoint of $9.50 - largely off the back of increased supply both globally and domestically.
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Episode Transcript
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Speaker 1 (00:00):
Today's big news story is farming's worst secret. Yes, the
Fonterra forecast milk price has dropped to nine dollars fifty.
Miles Hurrell joins US, chief executive of Fonterra. Miles, is
this totally a supply story? I too much of it?
Speaker 2 (00:16):
Yeah, you get a jammy, very much a supply story.
I mean, demand generally in the international market's not too bad.
We think the supply chains are a relatively empty globally,
given I guess the uncertainty, but yeah, we've just seen
a whole lot of milk out of Europe, a whole
lot of milkout out of North America, even Latin America,
and of course back here at home a lot more milk.
And so you know, at some point that comes back
(00:36):
to bite us, and we've obviously got to adjust accordingly.
Speaker 3 (00:40):
Say, yeah, that's very much a supply story this time.
Speaker 1 (00:42):
So our milk volumes forecast to be fifteen hundred and
forty five million kilograms, up from fifteen hundred and twenty
five million kilograms. Is that your fault for chucking ten
dollars out there so early in the season.
Speaker 3 (00:57):
Well, you know, this is the joys of working in
the corporative. I mean, we'll give the signals.
Speaker 2 (01:02):
Ultimately, farmers make their own decisions on farm So yeah,
it is up from fifteen to twenty five from a
forecast perspective. But importantly we're up from fifteen oh nine
from our last year number, so it is quite a
significant increase. So you know circle four pacing up I
think year to date that's a lot of extra milk
and the international market. Put that in the context of
also what we're seen out of Europe, what we're seen
(01:23):
out of North America and Latin America. You know, the
increase that we've seen on an annualized basis out of
the northern hemishere is probably another half of New Zealand again,
so you know, it's been pretty good milk price in
Europe as well in North America, and so those things there,
as I say that, they come home to roost, and
unfortunately they have. At this point, we thought it was
important to get out once the position came clear to
us when we cleaned up the numbers over the weekends.
(01:46):
So hence we have come out now a little bit
earlier than probably a market up that we anticipated next week.
Speaker 1 (01:50):
Yes, because the quarter one business update was due next week,
and that's when we want us commentators, Miles, We're all
expecting you to move then.
Speaker 2 (01:59):
Yeah, looks you know, when the information becomes clear, let's
not sit on it. You know, farmers will make decisions
every day around what I guess winter grazing contracts for
next year and what fee they may purchase for quarter
one and quarter two next year. So if any information
we get, if it's clear, let's move on it. So
we've made that decision. We've also narrowed the range, which
again that was due to be done next week. So
(02:21):
we've narrowed that range down. But I said, a big
news story there is from ten dollars to nine fifty,
which is still you know, if I'm brave enough to stay,
not a bad number when you look through history, still
well above sort of cost of production for the vast
majority of our farmers. So you know, farmers should still
be pretty happy with that, recognizing of course it does
back from last year and our prior forecast.
Speaker 1 (02:41):
Well, I'll say it because you won't well you don't
want to. If you can't make money at nine dollars fifty,
you shouldn't be farming dairy farming.
Speaker 2 (02:49):
Yeah, yeah, well, I mean has to say you can
say that, but our farmers who owned the croper will
make their own decisions. But as I say, I think
the conversations I've had with a couple of farmers this
morning that they understand how the market works, and as
you say, are still making pretty good money at nine
point fifty.
Speaker 3 (03:07):
Of course, I've still got a bit of.
Speaker 2 (03:08):
Capital expenditure coming down the line, but a deferred maintenance
from a couple of those softy years, so you know,
we don't take those things for granted.
Speaker 3 (03:14):
Also, will some of.
Speaker 1 (03:15):
The blow is going to be softened by your cash payout,
your Santa Claus payment which will come in the early
part of next year. The two dollars per share payout.
Speaker 2 (03:24):
Yeah, well when least be really clear, it's a capital return,
so you know it's ultimately their cash that it already
exists with the cop now, so it's really just the
repatriation of the capital that already sits within the balance
sheet of the co operative.
Speaker 3 (03:36):
So but yes, that will certainly help.
Speaker 2 (03:38):
And again a conversation of people farmers is a range
of views, but I think a fair chunk will go
to debt repayment and that deferred maintenance, and maybe farmers
need a bit of a break as well, so you
might see a little bit spent on enjoying and enjoying themselves.
Speaker 3 (03:51):
So good on them.
Speaker 1 (03:53):
You're quoted as saying the new midpoint of nine dollars
fifty per kilogram of milk solids remained an inverted common
strong forecast. What does that mean?
Speaker 2 (04:03):
Well, well, as I say, I still think nine to
fifty is a pretty decent number when you look back
through history, I recognize and of course nine fifty is
not today, is not nine to fifty from a few
years ago, So I acknowledge that, but it's still a
pretty solid number when you look to the past. Of course,
we've still got a heck of a lot of the
season to go, so a contract books in a pretty
good state. We've hedged a fair way out at that
(04:25):
this dollar where it is, so that that gives us
some element of confidence, but you know, still a long
way to go. We need to see what what this
milk price forecast does in terms of supply. But also
Northern hemisphere, their milk price is dropping quite quite quickly
up a Northern hemisphere. Will that turned the tap off
as well, probably and that'll put us in a better
position for the second half hopefully, but we'll see how
(04:45):
that plays out.
Speaker 1 (04:46):
Is the hedging department at Fonterra working overtime at the
moment getting in boots on all of these good rates.
Speaker 3 (04:52):
Yeah, well it's interesting.
Speaker 2 (04:53):
You know, a good rate today, you know, and it
is a good rate again you look back through history,
but you know people will sort of a couple of togo.
We're saying, let's lock it in because it's a good rate,
so she's can continue to fall. So you know, we
run a policy to ensure that we don't get sort
of speculation in there and just take a little bit
of risk out of it out of the book, but
also goes a long way to locking in these sort
of numbers for a chunk of next year too. So
(05:15):
it's the policy we run, and you know, there will
always be a few critics out there with it's the
right thing to do, but if we can remove some
of that risk of volatility for both the corporative and
shy holders, that's what we'll do.
Speaker 1 (05:25):
Risk mitigation on them all for it. Miles Harrald, Chief
Executive of Fonterra. Thanks there's always for your time on
the country.
Speaker 3 (05:32):
Thanks so much, Jermy
Today's big news story is farming's worst secret. Yes, the
Fonterra forecast milk price has dropped to nine dollars fifty.
Miles Hurrell joins US, chief executive of Fonterra. Miles, is
this totally a supply story? I too much of it?
Speaker 2 (00:16):
Yeah, you get a jammy, very much a supply story.
I mean, demand generally in the international market's not too bad.
We think the supply chains are a relatively empty globally,
given I guess the uncertainty, but yeah, we've just seen
a whole lot of milk out of Europe, a whole
lot of milkout out of North America, even Latin America,
and of course back here at home a lot more milk.
And so you know, at some point that comes back
(00:36):
to bite us, and we've obviously got to adjust accordingly.
Speaker 3 (00:40):
Say, yeah, that's very much a supply story this time.
Speaker 1 (00:42):
So our milk volumes forecast to be fifteen hundred and
forty five million kilograms, up from fifteen hundred and twenty
five million kilograms. Is that your fault for chucking ten
dollars out there so early in the season.
Speaker 3 (00:57):
Well, you know, this is the joys of working in
the corporative. I mean, we'll give the signals.
Speaker 2 (01:02):
Ultimately, farmers make their own decisions on farm So yeah,
it is up from fifteen to twenty five from a
forecast perspective. But importantly we're up from fifteen oh nine
from our last year number, so it is quite a
significant increase. So you know circle four pacing up I
think year to date that's a lot of extra milk
and the international market. Put that in the context of
also what we're seen out of Europe, what we're seen
(01:23):
out of North America and Latin America. You know, the
increase that we've seen on an annualized basis out of
the northern hemishere is probably another half of New Zealand again,
so you know, it's been pretty good milk price in
Europe as well in North America, and so those things there,
as I say that, they come home to roost, and
unfortunately they have. At this point, we thought it was
important to get out once the position came clear to
us when we cleaned up the numbers over the weekends.
(01:46):
So hence we have come out now a little bit
earlier than probably a market up that we anticipated next week.
Speaker 1 (01:50):
Yes, because the quarter one business update was due next week,
and that's when we want us commentators, Miles, We're all
expecting you to move then.
Speaker 2 (01:59):
Yeah, looks you know, when the information becomes clear, let's
not sit on it. You know, farmers will make decisions
every day around what I guess winter grazing contracts for
next year and what fee they may purchase for quarter
one and quarter two next year. So if any information
we get, if it's clear, let's move on it. So
we've made that decision. We've also narrowed the range, which
again that was due to be done next week. So
(02:21):
we've narrowed that range down. But I said, a big
news story there is from ten dollars to nine fifty,
which is still you know, if I'm brave enough to stay,
not a bad number when you look through history, still
well above sort of cost of production for the vast
majority of our farmers. So you know, farmers should still
be pretty happy with that, recognizing of course it does
back from last year and our prior forecast.
Speaker 1 (02:41):
Well, I'll say it because you won't well you don't
want to. If you can't make money at nine dollars fifty,
you shouldn't be farming dairy farming.
Speaker 2 (02:49):
Yeah, yeah, well, I mean has to say you can
say that, but our farmers who owned the croper will
make their own decisions. But as I say, I think
the conversations I've had with a couple of farmers this
morning that they understand how the market works, and as
you say, are still making pretty good money at nine
point fifty.
Speaker 3 (03:07):
Of course, I've still got a bit of.
Speaker 2 (03:08):
Capital expenditure coming down the line, but a deferred maintenance
from a couple of those softy years, so you know,
we don't take those things for granted.
Speaker 3 (03:14):
Also, will some of.
Speaker 1 (03:15):
The blow is going to be softened by your cash payout,
your Santa Claus payment which will come in the early
part of next year. The two dollars per share payout.
Speaker 2 (03:24):
Yeah, well when least be really clear, it's a capital return,
so you know it's ultimately their cash that it already
exists with the cop now, so it's really just the
repatriation of the capital that already sits within the balance
sheet of the co operative.
Speaker 3 (03:36):
So but yes, that will certainly help.
Speaker 2 (03:38):
And again a conversation of people farmers is a range
of views, but I think a fair chunk will go
to debt repayment and that deferred maintenance, and maybe farmers
need a bit of a break as well, so you
might see a little bit spent on enjoying and enjoying themselves.
Speaker 3 (03:51):
So good on them.
Speaker 1 (03:53):
You're quoted as saying the new midpoint of nine dollars
fifty per kilogram of milk solids remained an inverted common
strong forecast. What does that mean?
Speaker 2 (04:03):
Well, well, as I say, I still think nine to
fifty is a pretty decent number when you look back
through history, I recognize and of course nine fifty is
not today, is not nine to fifty from a few
years ago, So I acknowledge that, but it's still a
pretty solid number when you look to the past. Of course,
we've still got a heck of a lot of the
season to go, so a contract books in a pretty
good state. We've hedged a fair way out at that
(04:25):
this dollar where it is, so that that gives us
some element of confidence, but you know, still a long
way to go. We need to see what what this
milk price forecast does in terms of supply. But also
Northern hemisphere, their milk price is dropping quite quite quickly
up a Northern hemisphere. Will that turned the tap off
as well, probably and that'll put us in a better
position for the second half hopefully, but we'll see how
(04:45):
that plays out.
Speaker 1 (04:46):
Is the hedging department at Fonterra working overtime at the
moment getting in boots on all of these good rates.
Speaker 3 (04:52):
Yeah, well it's interesting.
Speaker 2 (04:53):
You know, a good rate today, you know, and it
is a good rate again you look back through history,
but you know people will sort of a couple of togo.
We're saying, let's lock it in because it's a good rate,
so she's can continue to fall. So you know, we
run a policy to ensure that we don't get sort
of speculation in there and just take a little bit
of risk out of it out of the book, but
also goes a long way to locking in these sort
of numbers for a chunk of next year too. So
(05:15):
it's the policy we run, and you know, there will
always be a few critics out there with it's the
right thing to do, but if we can remove some
of that risk of volatility for both the corporative and
shy holders, that's what we'll do.
Speaker 1 (05:25):
Risk mitigation on them all for it. Miles Harrald, Chief
Executive of Fonterra. Thanks there's always for your time on
the country.
Speaker 3 (05:32):
Thanks so much, Jermy
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