DAIRY farmers will keep an eye on short-term milk price caution expressed by giant Dutch co-op FrieslandCampina, but they will not be unduly worried by it, according to IFA dairy chairman Kevin Kiersey.
FrieslandCampina’s business partner Fonterra yesterday decided to maintain its mid-term farmgate milk price forecast despite the Dutch co-op’s cautions about a "stagnant" European market and a drop of more than 15% in dairy market values.
New Zealand-based Fonterra, the world’s top dairy exporter, held at NZ$6.75 (€4.05) per kilo of milk solids its estimate for payouts to its farmers in 2011-12. Fonterra issued its New Year forecast back in May.
Its Dutch partners have flagged a continued drop in world dairy prices since then, but for now Fonterra is sticking with its original price.
Mr Kiersey said: "It is a short-term warning, but hopefully it won’t come to anything serious. The market for commodities has been under pressure in recent months, but it is traditionally slow in the summer months.
"The main markets in China, Russia and Algeria have bought a lot of their commodities in the first six months of the year, but we expect that they will come back to buy in the market again soon.
"Any stagnation in the European market would be overcome by those countries returning to the market, or indeed if weather conditions led to New Zealand experiencing a slow start to the New Year."
Fonterra chairman Sir Henry van der Heyden yesterday told Agrimoney.com the group had "largely anticipated" the fall in dairy prices when issuing its price forecasts back in May.
He said: "In volatile economic and market conditions, we could face a range of factors that may affect the season’s milk price. But at this very early stage of the season we see no reason to alter the forecast."
Mr Kiersey said: "One important doubt in the marketplace is the global economic situation. That is certainly a concern. The big commodity players will have to keep buying for the price to stay up.
"FrieslandCampina are also probably basing their concerns on the fact that there is a global surplus of 3% in milk, while global demand is only at 2%. That 1% gap could put some extra product on the market, and cause a lowering of the price.
"However, that situation could change very quickly. We are keeping our fingers crossed. It is a concern, but the situation will not be too serious once the Chinese, Russians and Algerians start buying again."