John Stevenson: Fonterra Co-operative Council Chair on the impact of rising global dairy production

Kiwi consumers could finally see butter prices fall, thanks to increased global dairy production.  

New research from Rabobank shows EU, UK, and US production has been surging, pushing down global prices. 

Fonterra's already forecasting a lower farmgate payout than last season. 

Fonterra Co-operative Council Chair John Stevenson told Heather du Plessis-Allan the change could be good news for supermarket shoppers. 

He says if the surge continues, there'll be an impact on our store shelves. 

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Episode Transcript

Speaker 1 (00:00):
Now Fonterra's warning farmers to expect lower earnings next year
with global production now outstripping demand. The co op is
already lowering its forecast or has already to nine and
a half nine dollars fifty paquilo of milk solids. John Stephenson,
is the Fonterra Cooperative Council chair, is with us.

Speaker 2 (00:15):
Morning John, Good morning Heather.

Speaker 1 (00:17):
Now what is going on here that everyone, the Big
seven is producing so much milk at the moment?

Speaker 2 (00:22):
I think sort of commodity prices are a reflection of
global supply and demand, and in the strong prices we've
seen over the last twelve months have driven a supply response.
So it's something that we've seen before. But for us
as farmers, obviously that that impete on prices is not
something that we're so happy about.

Speaker 1 (00:42):
Yeah, this increase in production from the Big Seven, Is
this a blip or is this the new normal? They
will hold it at this level.

Speaker 2 (00:51):
I think, you know, So we've certainly seen really historically
strong prices, so it's not surprising to see that supplier response.
Have also seen relatively low feed prices as well. So
those overseas systems that rely more on important feed than
the grass systems we run here. They've got the ability
to respond pretty quickly. So I mean the cure for

(01:13):
higher prices can be higher prices because of that demand
response or the supply response and the effect that he's
on demand. So hard to say either, but you know
we'll certainly be keeping a closer untimes.

Speaker 1 (01:26):
Now you're talking there about the full cast payout, which
isn't isn't outstanding for the farmers. I saw somewhere. You
could correct me if I'm wrong, but I thought I
saw somewhere that we will be back to twenty five levels,
which were records in about three years or so. Is
that right?

Speaker 2 (01:40):
Again from a farmer's perspective, it's really hard to say
than others, But yeah, certainly we would hope to see
a return to those strong prices. But in saying that,
you know we are at the wim of those global
markets and supply and demand. It's basically as simple as
that either.

Speaker 1 (01:57):
Yeah. Now, got to talk about Butter, John, because you
know I'd be shot if I didn't. I see the
price of Butter's come back nine percent on the markets.
What's it doing at retail?

Speaker 2 (02:07):
Has it followed, and there's always a bit of a
leg on both the upper and the downward side. You know,
obviously the supplies of milk and the products that we
can make out of milk. Gairy farmers like to see
strong prices. But you know, butter, we've seen what's happened
in the global dairy trade, so you know is if
that continues, expectations would be to see that they'd impact

(02:32):
on our store shelves.

Speaker 1 (02:34):
John, thank you very much for your time, look after yourself,
have a good day. That's John Stephenson, Fonterra Cooperative Council Chair.

Speaker 2 (02:39):
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