Synlait’s announcement forecasts a drop from $3.23 (NZ$5.00) per kgMS to $2.72 (NZ$4.20) per kgMS.
Chairman Graeme Milne said the revision is driven by the sustained low global commodity prices since September 2015, and a view that the recovery will be slower than anticipated.
“Our previous forecast of $5.00 kgMS expected prices to recover somewhat by this stage in the season, however this hasn’t happened and our revised forecast reflects this,” Milne said.
“European milk production is high following the removal of quotas last year. Low oil prices mean cheap feed for farmers in Europe, USA and China while demand for imported dairy commodities by China, the world’s largest importer, has declined as their local milk production has increased.”
Tough year for farmers
Milne said Synlait expects to revise the forecast milk price again in May 2016.
Managing director and CEO John Penno said there is no doubt this year will be very tough for dairy farmers, with two straight years of unsustainably low milk prices.
“It’s important that we continue to give our suppliers a clear and realistic idea of where the milk price is likely to end up. As always things may change, and we hope they do because it’s hard to run a dairy farm business in this environment,” said Penno.