New Zealand dairy giant Fonterra Co-operative Group has cut the current season forecast Farmgate milk price to $4.40 per kilo of milk solids (kgMS) after the increase in global commodity prices failed to meet the required expectations.
The change amounts to a forecast cash payout of $4.60-$4.70 for the current season that would be paid to a fully shared-up farmer.
Fonterra Chairman John Wilson said: "World markets are over-supplied with dairy commodities after farmers globally increased production in response to the very good prices paid 12-18 months ago. This supply imbalance has heightened due to continuing good growing conditions in most dairy producing regions.
"This is a tough season and we will continue to keep our farmers informed as the season draws to a close given the current volatility."
With the forecast farmgate milk price revised for the current season, a further revision will also happen to the Advance Rate Schedule of monthly payments to farmers.
Fonterra also announced an opening forecast farmgate milk price of $5.25 per kgMS for the 2015/16 season. However, it does not include the forecast earnings for the 2015/16 financial year.
Wilson said: "We can expect prices to recover going forward, and to see a rebalancing of supply and demand over the season. However it is more difficult this early in the season to determine exactly when this recovery will lead to a sustained price improvement."
The company is expecting strong global dairy demand in the long-term.