Fonterra lifts NZ forecast farmgate price as global prices rebound

The giant NZ co-op lifted its forecast price NZ30 cents a kilogram to a midpoint $NZ7.80/kg MS on February 12.

It follows another lift in prices at the Global Dairy Trade (GDT) auction on February 6, the fifth consecutive rise.

Fonterra's forecast range for the season is now $NZ7.30-$8.30/kg MS.

"Recently, we've seen a lift in demand, primarily from the Middle East and South East Asia, for our reference commodity products and this has been reflected in GDT prices," Fonterra CEO Miles Hurrell said.

"Overall GDT prices are up 10 per cent since our last farmgate milk price update in December, with whole milk powder (WMP) prices up 11.5pc over the same period."

Pundits had been factoring in a rise.

Westpac revised its forecast price to $NZ7.90/kg MS on February 6.

ASB was even more optimistic, lifting its forecast price to $8/kg MS on February 8.

ASB economist Nat Keall said despite the season being nearly over and Chinese processors still largely absent, strong auction results continued to push the forecast higher.

The strong WMP prices were surprising, proving robust despite the continued weakness in China, Mr Keall said.

Likely drivers underpinning the surprising resilience in prices included strong WMP demand from other regions, notably the Middle East.

The ongoing disruption in the Red Sea was a catalyst pushing trade away from northern hemisphere producers and towards NZ.

Mr Hurrell said the potential impact of geopolitical instability and supply chain disruption on demand from key importing regions remained uncertain.

"We can navigate these dynamics thanks to our scale and our diversification across markets, which provides us with optionality," he said.