Market pressure is intensifying on Fonterra as expectations grow that the cooperative will be compelled to revise its milk price forecast ahead of its 4 December first-quarter FY2025 results. Under New Zealand’s Dairy Industry Restructuring Act, Fonterra must publicly disclose any forecast movement of 30 cents or more, an obligation analysts believe the cooperative is edging closer to triggering. While the disclosure rule offers transparency for farmers, it also amplifies market sensitivity during periods of steep commodity volatility.
The latest Global Dairy Trade (GDT) auction reinforced the urgency of the situation. Whole milk powder, a cornerstone of New Zealand’s export earnings, fell 1.9 percent and has now plunged 21 percent since its May peak. Skim milk powder slipped 0.6 percent, while cheddar and mozzarella dropped 2.7 percent, indicating that weakness is not confined to a single product but spreads across the board. These widespread declines point to deeper structural imbalances relating to global oversupply and softening demand.
Auction outcomes surprised even seasoned traders, coming in significantly weaker than signals from futures markets. NZX head of dairy insights Cristina Alvarado attributed the seventh consecutive GDT index drop to persistently high milk flows in major exporting regions, subdued seasonal consumption and tightening macroeconomic conditions in key import markets. This combination, she noted, suggests limited recovery in the near term unless supply moderates.
Analysts warn that if current trends persist, processors across the Southern Hemisphere may be forced to further reassess their payout guidance. For farmers, a downward revision from Fonterra would heighten pressure on cash flow, particularly as input costs remain elevated and climatic uncertainty shapes early-summer production curves.
