July 13, 2026 • 7 mins
Fonterra's lowered this season's forecast milk payout following the recent drop in global dairy prices.
The midpoint has dropped from $9.75 to $9.25 – well below the $9.70 payout currently forecast for last season.
Prices at Global Dairy Trade auctions have fallen 11% since the opening forecast was announced in May.
Fonterra CEO Richard Allen told Mike Hosking demand has been softer than anticipated, while production —globally and in New Zealand— has been very strong.
He says overall demand is still there, it’s just not quite as strong as they thought it was going to be.
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Speaker 1 (00:00):
To the farm where a supply of milk product has
presented an issue in terms of demand. Yesterday, Fontira Cutters
Farmgate forecast new range for twenty six twenty seven is
eight to ten fifty the midpoint down fifty to nine
twenty five. Richard Allen is Fontira's new Ish CEO and
as well us very good morning to you, Morny make
and congratulations on the job and all that sort of stuff.
(00:20):
So far, so good. You haven't cocked anything up so far.
Speaker 2 (00:24):
I'm not the judge of that, but yeah, that's so fast.
They could thank you very good.
Speaker 1 (00:26):
So what literally take us into the minds of the
room where this happens. Why nine to fifty to nine
twenty five? And who pulls the trigger?
Speaker 2 (00:34):
Yeah. Look, we've seen prices decline on the Global Dairy
Trade Action about eleven percent since since we came out
with the oppening forecast in May. That's largely off the
back of two things. We have seen demand softer than
we're probably anticipating, but also right around the world, including
here in New Zealand, we've seen very strong milk supply
growth over the last over the last twelve to eighteen months,
(00:55):
so we had a bumper season last year here just
over four percent growth. Europe also growing strongly, so that
just puts more product into the market. Overall, demand is
still still there, It's just not quite as strong as
we thought it was going to be.
Speaker 1 (01:08):
So what's going to change demand or supply?
Speaker 2 (01:10):
Well both, probably a bit of both. Dairy does have
the tendency to overreact a little bit, so we will
probably see supply come off. We're already starting to see
that in terms of some of the heat impacts in
the in the EU and the US starting to bring
milk off. Demand you know, was starting to look quite good. Obviously,
the disruption in the Middle East impacts consumer sentiment. We
(01:33):
have started to see that flow through a little bit.
But overall we're still in a pretty good position.
Speaker 1 (01:37):
Okay, so Westpac still at nine point fifty and not changing.
How close a call is yours or are they wrong?
Speaker 2 (01:44):
Look, I mean it's very early in the season, and
so we're probably all wrong. I'd say, you know, there's
a lot of water to go into the bridge in
terms of milk to be sold across the season. Every
dairy season I've been in, there have been twisted turns
that we didn't quite expect, So there will be twisting
turns season. I think we will be somewhere, you know,
where we believe we are today is our best view.
(02:05):
But again, you know it's a volatile word out there.
Speaker 1 (02:07):
When you talk about El Nino. How do you get
your head around that given we don't know.
Speaker 2 (02:12):
We don't know absolutely not. I think where we sort
of come at it from is our farmers are much
better prepared in terms of their preparations for drought on
farm than they were probably ten fifteen years ago, So
they plan for dry summers in parts of the country
we have more protection against that, you know, areas like
Canterbury where we have a lot of irrigation, then those
(02:33):
farmers are much more protected against you know where the patterns.
But if it comes, I'm sure our farmers all have
plans and place. There's pretty good supplementary feed on farm.
You know, we had a good growing season last year.
But again you just got to You've got to take
what comes and roll with it.
Speaker 1 (02:46):
So what do you worry about more, the heat of
the northern hemisphere or the heat of us.
Speaker 2 (02:52):
Definitely I worry about our farmers more. You know, the
climatic conditions in New Zealand do have an impact on
our farmers have an impact on their ability to produce.
So that's what we think a lot about. But again,
our job is to pick up the milk and make
the most money from it. You know, our farmer's role
is to their and run their own farm.
Speaker 1 (03:07):
And what's the equation around what may happen weather wise
versus the price going up through lack of supply versus
what you lose through lack of production.
Speaker 2 (03:18):
Look, it all comes, it all comes into the max
at the minute. Where you know, we we don't sort
of take fixed point prices. We take scenarios, so we
look at multiple different ways things could play out and
we sort of adjust our tactics in line with that.
We see a relatively strong milk season here in New
Zealand again next year, so we're planning on good milk
(03:39):
and New Zealand next year. If that changes for the climate,
then then we'll you know, we're pretty good at adjusting,
you know, out production and what we make and who
we sell to.
Speaker 1 (03:48):
So that that's in the here and now, what about
the bigger picture, which is the protein story for example,
and the whole world wants protein, and I assume that
doesn't change no matter what. So the big picture is
still good.
Speaker 2 (03:58):
Yes, absolutely. You know, in my sort of nineteen years
in the company, I've never been excited. Consumers around the
world want the way we make dairy. They want natural products,
they want grass fed products, they want you know, the
protein and the fat that comes off our dairy farms.
So look, we're sitting in a good position. We're investing
behind that, both in terms of product innovation and also
(04:20):
our asset base to make sure we keep up with
the right type of products so we can access the
most valuable demand around the world. You know, there will
be ups and downs in the market for sure, but
we're we're looking to build a business that is profitable
through cycle.
Speaker 1 (04:33):
How big a deal is China and them getting on
board or back on board?
Speaker 2 (04:37):
Oh, China's massive for us, right They're about a third
of our business. They are a very very important market
for us. They will continue to be an important market
for us. They're still going relatively well, you know, you're
on your inputs were up on over the last twelve months.
Their economy is maybe kicking back into gear. You know,
I think they just reported four and a half percent
GDP growth for the twelve months, so four and a
(04:59):
half percent. Most of us would take that in terms
of GDP. So they're going all right. They're a big
important market for us, both from a food service and
ingredients and you we've got some great customers.
Speaker 1 (05:07):
How edgile l are you as a cooperative slash business
to take somebody's milk and do something well with it
and better than somebody else.
Speaker 2 (05:18):
I think we're getting a lot better at it, you know.
I think you know, COVID taught us a lot in
terms of needing to be agile and flexible. You know,
overnight markets would shut off, you know, supply chains would
shut down, and then we've had you know, obviously the
various supply chain crises that we've had over the last
five years, whether it be ships running aground, ships running
into bridges, was you know, you name it, we've kind
of had it. So we're getting much better. And this
(05:41):
is you know, when we talk about innovation and we
talk about investment, our job is to build that optionality
in our asset base so that when demand changes, when
prices changed, when the markets change, we have the ability
to change with it and ensure that we're maximizing value
for our farmers.
Speaker 1 (05:57):
Okay, so what concerns me and I've talked about it
with Miles a lot is this and it's eight seventy
nine currently break evens eight dollars seventy nine. You look
at the history of milk prices in this country, it's
not often above eight. So what is there something fundamentally
wrong with debt? There's too much of it?
Speaker 2 (06:15):
I think, I mean our farmers that there's been a
huge amount of debt repaid over the last sort of
five to six years. You know, it is important when
you think about a cooperative, You've got to think about
debt in the widest sense, not just debt on farm,
but also debt in the co op. And the co
ops in great shape. You know, our gearing ratio is
now below twenty percent, which means our farmers can ensure
that that the co oppers is strong. It can go
(06:37):
through cycle that will, you know, go through the ups
and downs on farm. You know, there has been a
massive focus from our farmers but also from the banks
and ensuring that principle is getting repaid and our farmers
are in a much stronger position. I'd say that there
were ten years ago and a lot of them now
looking to you know, how do they expand how do
they grow? How do they continue to do what they
do best?
Speaker 1 (06:57):
Okay, So in somemmation you would describe right here, right
now as an industry as what good, bullish, optimistic.
Speaker 2 (07:04):
We're in a great shape. We're in a great shape.
We make a great product, a product that more and
more consumers around the world want to eat. The way
we make the areas special you know, Sunshina rain and
so yeah, for us, we're looking good, but we can't
stand still right You know, it's a very competitive word
out there. Things are moving very fast. So our job is,
you know, as a management team is stay focused, keep
(07:24):
keep keep innovating, keep investing for new value growth and
keep getting getting our milk out to the world.
Speaker 1 (07:30):
Appreciate your time. Good So you thank you, mate, Rochardell
on the head of Pontiers. For more from the Mic
Asking Breakfast, listen live to news talks. It'd be from
six am weekdays, or follow the podcast on iHeartRadio.
To the farm where a supply of milk product has
presented an issue in terms of demand. Yesterday, Fontira Cutters
Farmgate forecast new range for twenty six twenty seven is
eight to ten fifty the midpoint down fifty to nine
twenty five. Richard Allen is Fontira's new Ish CEO and
as well us very good morning to you, Morny make
and congratulations on the job and all that sort of stuff.
(00:20):
So far, so good. You haven't cocked anything up so far.
Speaker 2 (00:24):
I'm not the judge of that, but yeah, that's so fast.
They could thank you very good.
Speaker 1 (00:26):
So what literally take us into the minds of the
room where this happens. Why nine to fifty to nine
twenty five? And who pulls the trigger?
Speaker 2 (00:34):
Yeah. Look, we've seen prices decline on the Global Dairy
Trade Action about eleven percent since since we came out
with the oppening forecast in May. That's largely off the
back of two things. We have seen demand softer than
we're probably anticipating, but also right around the world, including
here in New Zealand, we've seen very strong milk supply
growth over the last over the last twelve to eighteen months,
(00:55):
so we had a bumper season last year here just
over four percent growth. Europe also growing strongly, so that
just puts more product into the market. Overall, demand is
still still there, It's just not quite as strong as
we thought it was going to be.
Speaker 1 (01:08):
So what's going to change demand or supply?
Speaker 2 (01:10):
Well both, probably a bit of both. Dairy does have
the tendency to overreact a little bit, so we will
probably see supply come off. We're already starting to see
that in terms of some of the heat impacts in
the in the EU and the US starting to bring
milk off. Demand you know, was starting to look quite good. Obviously,
the disruption in the Middle East impacts consumer sentiment. We
(01:33):
have started to see that flow through a little bit.
But overall we're still in a pretty good position.
Speaker 1 (01:37):
Okay, so Westpac still at nine point fifty and not changing.
How close a call is yours or are they wrong?
Speaker 2 (01:44):
Look, I mean it's very early in the season, and
so we're probably all wrong. I'd say, you know, there's
a lot of water to go into the bridge in
terms of milk to be sold across the season. Every
dairy season I've been in, there have been twisted turns
that we didn't quite expect, So there will be twisting
turns season. I think we will be somewhere, you know,
where we believe we are today is our best view.
(02:05):
But again, you know it's a volatile word out there.
Speaker 1 (02:07):
When you talk about El Nino. How do you get
your head around that given we don't know.
Speaker 2 (02:12):
We don't know absolutely not. I think where we sort
of come at it from is our farmers are much
better prepared in terms of their preparations for drought on
farm than they were probably ten fifteen years ago, So
they plan for dry summers in parts of the country
we have more protection against that, you know, areas like
Canterbury where we have a lot of irrigation, then those
(02:33):
farmers are much more protected against you know where the patterns.
But if it comes, I'm sure our farmers all have
plans and place. There's pretty good supplementary feed on farm.
You know, we had a good growing season last year.
But again you just got to You've got to take
what comes and roll with it.
Speaker 1 (02:46):
So what do you worry about more, the heat of
the northern hemisphere or the heat of us.
Speaker 2 (02:52):
Definitely I worry about our farmers more. You know, the
climatic conditions in New Zealand do have an impact on
our farmers have an impact on their ability to produce.
So that's what we think a lot about. But again,
our job is to pick up the milk and make
the most money from it. You know, our farmer's role
is to their and run their own farm.
Speaker 1 (03:07):
And what's the equation around what may happen weather wise
versus the price going up through lack of supply versus
what you lose through lack of production.
Speaker 2 (03:18):
Look, it all comes, it all comes into the max
at the minute. Where you know, we we don't sort
of take fixed point prices. We take scenarios, so we
look at multiple different ways things could play out and
we sort of adjust our tactics in line with that.
We see a relatively strong milk season here in New
Zealand again next year, so we're planning on good milk
(03:39):
and New Zealand next year. If that changes for the climate,
then then we'll you know, we're pretty good at adjusting,
you know, out production and what we make and who
we sell to.
Speaker 1 (03:48):
So that that's in the here and now, what about
the bigger picture, which is the protein story for example,
and the whole world wants protein, and I assume that
doesn't change no matter what. So the big picture is
still good.
Speaker 2 (03:58):
Yes, absolutely. You know, in my sort of nineteen years
in the company, I've never been excited. Consumers around the
world want the way we make dairy. They want natural products,
they want grass fed products, they want you know, the
protein and the fat that comes off our dairy farms.
So look, we're sitting in a good position. We're investing
behind that, both in terms of product innovation and also
(04:20):
our asset base to make sure we keep up with
the right type of products so we can access the
most valuable demand around the world. You know, there will
be ups and downs in the market for sure, but
we're we're looking to build a business that is profitable
through cycle.
Speaker 1 (04:33):
How big a deal is China and them getting on
board or back on board?
Speaker 2 (04:37):
Oh, China's massive for us, right They're about a third
of our business. They are a very very important market
for us. They will continue to be an important market
for us. They're still going relatively well, you know, you're
on your inputs were up on over the last twelve months.
Their economy is maybe kicking back into gear. You know,
I think they just reported four and a half percent
GDP growth for the twelve months, so four and a
(04:59):
half percent. Most of us would take that in terms
of GDP. So they're going all right. They're a big
important market for us, both from a food service and
ingredients and you we've got some great customers.
Speaker 1 (05:07):
How edgile l are you as a cooperative slash business
to take somebody's milk and do something well with it
and better than somebody else.
Speaker 2 (05:18):
I think we're getting a lot better at it, you know.
I think you know, COVID taught us a lot in
terms of needing to be agile and flexible. You know,
overnight markets would shut off, you know, supply chains would
shut down, and then we've had you know, obviously the
various supply chain crises that we've had over the last
five years, whether it be ships running aground, ships running
into bridges, was you know, you name it, we've kind
of had it. So we're getting much better. And this
(05:41):
is you know, when we talk about innovation and we
talk about investment, our job is to build that optionality
in our asset base so that when demand changes, when
prices changed, when the markets change, we have the ability
to change with it and ensure that we're maximizing value
for our farmers.
Speaker 1 (05:57):
Okay, so what concerns me and I've talked about it
with Miles a lot is this and it's eight seventy
nine currently break evens eight dollars seventy nine. You look
at the history of milk prices in this country, it's
not often above eight. So what is there something fundamentally
wrong with debt? There's too much of it?
Speaker 2 (06:15):
I think, I mean our farmers that there's been a
huge amount of debt repaid over the last sort of
five to six years. You know, it is important when
you think about a cooperative, You've got to think about
debt in the widest sense, not just debt on farm,
but also debt in the co op. And the co
ops in great shape. You know, our gearing ratio is
now below twenty percent, which means our farmers can ensure
that that the co oppers is strong. It can go
(06:37):
through cycle that will, you know, go through the ups
and downs on farm. You know, there has been a
massive focus from our farmers but also from the banks
and ensuring that principle is getting repaid and our farmers
are in a much stronger position. I'd say that there
were ten years ago and a lot of them now
looking to you know, how do they expand how do
they grow? How do they continue to do what they
do best?
Speaker 1 (06:57):
Okay, So in somemmation you would describe right here, right
now as an industry as what good, bullish, optimistic.
Speaker 2 (07:04):
We're in a great shape. We're in a great shape.
We make a great product, a product that more and
more consumers around the world want to eat. The way
we make the areas special you know, Sunshina rain and
so yeah, for us, we're looking good, but we can't
stand still right You know, it's a very competitive word
out there. Things are moving very fast. So our job is,
you know, as a management team is stay focused, keep
(07:24):
keep keep innovating, keep investing for new value growth and
keep getting getting our milk out to the world.
Speaker 1 (07:30):
Appreciate your time. Good So you thank you, mate, Rochardell
on the head of Pontiers. For more from the Mic
Asking Breakfast, listen live to news talks. It'd be from
six am weekdays, or follow the podcast on iHeartRadio.
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