Synlait cuts milk price forecast

Synlait Milk has cut its farmgate milk price forecast for this season to $4.20 a kg of milksolids from $5.00 a kg.

The Rakaia-based company said low international prices were behind the move, which follows Fonterra cutting its farmgate milk price forecast last week.

Synlait managing director and chief executive John Penno said things were "very tough" for dairy farmers who had gone through two 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.

Synlait chairman Graeme Milne believed that the recovery in commodity prices would 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.

"Similar to this time last year, there is still a lot of uncertainty. While our business is focused on value added products, global commodity pricing is the main driver behind the milk price that our suppliers receive. 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," he said.

Last September, Synlait Milk cut its forecast milk price for the current season to $5.00 per kg of milksolids from $5.50 per kg.