Fonterra has given dairy farmers some good news with a 30c increase in its forecast average farmgate milk price.

This brings the milk price to 20c below the May 2023 average forecast.

On February 12 the dairy co-operative lifted its forecast farmgate milk price to an effective midpoint payment of $7.80 per kilogram of milk solids (kgms).

Dorie dairy farmer Mark Cressey said the increase was "very good news" and would take "some pressure" off dairy farmers.

"We're seeing demand increasing from the Middle East and a little bit of demand coming back from China."

Cressey said operations would still be tight for some farmers because of inflation. While the price of fertiliser had come down, other costs - such as feed - had gone up and stayed up.

Three years ago $8 would have been a good payout. If it gets to $8 this year, it will be sustainable, he said.

In May last year Fonterra’s average forecast was $8.00/kgms. But the mid-point price was slashed to $6.75 in August due to a flagging global market. The cut put a squeeze on farmers and took the milk price below breakeven for many dairy farms.

In October, the price inched up by 50c and by another 25c in December to $7.50.

The forecast range for the season is now $7.30-$8.30/kgms thanks to stronger global demand.

Fonterra chief executive Miles Hurrell said global dairy trade prices had improved by 10% since Fonterra's price update in December.

However, the "potential impact of geopolitical instability and supply chain disruption" on demand from key importing regions remained uncertain, he said.

by Sharon Davis