Global dairy giant Fonterra says there is likely to be more volatility in global dairy prices, following on from a financial year in which prices went on an unprecedented rollercoaster.
In Fonterra's 2007/08 Annual Review sent to shareholders this week, cooperative chairman Henry van der Heyden said market unpredictability, rising costs, a high currency and financial turmoil made for a challenging business environment in the financial period ended July 31, 2008.
"However, Fonterra worked within this highly volatile environment to bring shareholders the best result since our formation," Mr van der Heyden said.
"It is clear that 2007/08 has fundamentally changed market dynamics and volatility is more likely to be the norm, rather than the exception, in the medium term.
"With global financial confidence tenuous at best and the inevitable lag between price signals guiding farmer decisions around production, there is every possibility of an imbalance between demand and supply influencing prices."
Average dairy prices achieved by Fonterra during the 14 months to 31 July were US$4350 per tonne, compared with US$2673 a tonne in the previous 12-month period.
International milkpowder prices peaked at around US$5000 per tonne in late 2007 but more recently have fallen back to around US$2600 a tonne.
It was in this environment that Fonterra achieved its best-ever financial result in 2007/08, generating $9.3 billion for farmer shareholders.
About $9 billion was paid to farmers in the milk price component of payout, representing $7.59 per kg of milksolids (kgMS).
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