Fonterra has reduced and narrowed its 2022/23 season forecast to $8.20 - $8.80 per kg of milksolids, with a midpoint of $8.50, due to softer demand out of China.

The previous forecast was in a range of $8.50 - $9.50 per kgMS, with a midpoint of $9.00.

The co-op has also cut its forecast milk collections for the 2022/23 season to 1,465 million kg of milk solids, down from its previous forecast of 1,480 million kgMS, in part due to Cyclone Gabrielle.

Fonterra chief executive Miles Hurrell said the revised forecast milk price range reflected softened demand at a time of balanced supply.

“Demand for whole milk powder, particularly from Greater China, has been soft with prices down around 5 per cent since the beginning of December,” he said.

“While we are encouraged by recent increased buying behaviour from China, it is too soon to determine the extent of the impact this may have on the rest of the season.

“We also remain cautious given a soft economic growth outlook in many regions globally,” he said.

While Fonterra’s collections for the season are up on this time last year, Cyclone Gabrielle and dry conditions in the South Island impacted the Co-op’s full season expectations, he said.

“Globally, milk supply from key exporting regions is balanced,” he said.

 “Production from Europe and the US is up on last year, but this is partly offset by lower collections in New Zealand, Australia and Latin America,” Hurrell said.

The medium to long-term outlook for dairy, in particular New Zealand dairy, looked positive.

“We are assessing our position for next season and will provide our opening forecast in May,” Hurrell said.