Fonterra 2014/15 milk price calculation gets NZ Commerce Commission approval

But the price would need to go materially higher than US$2000 over the next nine months for Fonterra to be able to pay farmers its latest forecast milk price of $3.85, Williams said.

The New Zealand dollar last traded at 65.88 US cents at about 2.40pm in New York, compared with 65.84 US cents at 5pm in Wellington the previous day.

Fonterra this month dropped its forecast milk payout to New Zealand farmers to the lowest in at least 10 years after a global glut and weak demand from China drove global dairy prices to a 12-year low. Prices have fallen 9-10% in each of the past two milk auctions (which take place every fortnight) and haven’t risen at auction since March.

ANZ economists say prices have bottomed, and a turning point is coming.

For the August 18 GDT Fonterra will offer 18,000 tonnes of whole milk powder instead of the originally planned 27,500 tonnes.

“Milk prices are unsustainably low and below the bottom”, Mr Spierings said.

In a statement, the world’s largest co-operative has said the forecasted offer volumes over the next 12 months for New Zealand products have been decreased by 56,045 metric tonnes. “We are living in efficient markets and the NZX futures were telling you that this GDT auction was going to be a pretty decent bounce and markets have priced that in to kiwi over the beginning of this week”, said ANZ Bank New Zealand senior FX strategist Sam Tuck.

“They could be bouncing back, but it’s more of a correction rather than showing strong demand in the sales channel”.

However they remain cautious on the extent of the likely rebound.

However, big questions remain over when prices will recover, although longer term market prospects are thought to be in dairying’s favour.

Earlier today, the Commerce Commission published a draft report on Fonterra’s FGMP calculation for the 2014/15 milk production season.

Looking ahead, United Kingdom consumer price and producer price reports for July and house price index for June are due to be released at 4:30 am ET.

WMP index up 19.1%, average price US$1,856/MT.

“This seems unlikely, with most major global dairy processors pushing their expectations for a substantial recovery above these levels back into mid-2016, which will influence the 2016/17 outlook more than 2015/16”.