Dairy giant Fonterra has raised its milk payment for New Zealand farmers to a record NZ$6.90 (US$5.41) per kilogram of milksolids.
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Fonterra, which accounts for around 40% of worldwide dairy volumes, said the jump – from NZ$6.40 – was due to higher prices and increased production.
“The higher milk price is due to an increase in milk supply, which has flowed through to higher sales volumes at higher prices, but the gains have been somewhat offset by the higher New Zealand dollar,” Fonterra chairman Henry van der Heyden said.
The price of dairy commodities has soared this year on the back of rising demand for dairy in Asia’s emerging markets, including India and China.
Fonterra chief executive Andrew Ferrier said the company is seeing signs of an increase in the global supply in response to the record commodity prices.
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By GlobalData“We’re seeing growth in United States skim milk powder production,” Ferrier said. “We think this will factor into the market over the short to medium term and will bring a gradual softening to the market. However, structurally the market is much stronger than it has traditionally been.”
