“At the same time, demand for whole milk powder and dairy fats is showing signs of slowing in some parts of Asia, Africa and the Middle East,” chairman John Monaghan said.
Europe is running at just under a 2% year-on-year increase, the US 1% and Argentina 7%.
A 1% increase in the US is just under 100 million litres of extra milk.
Fonterra is in the early stages of filling its sales order book and the latest import data figures for China show a 17% increase year-on-year, which is encouraging, he said.
Interim chief executive Miles Hurrell said the recent decline in the value of the New Zealand dollar is not enough to offset the decline in international dairy commodity prices.
While a drop in the forecast will be frustrating for farmers it is important they receive a realistic assessment of the market.
“It’s still very early in the season and a lot can change over the coming months.”
The cut is a potential loss of milk income this season of $37,500 for the average-sized dairy farm.
Nonetheless $6.75 is still an encouraging prediction for farmers and if delivered in full by this time next year will be the fourth-highest in Fonterra’s 19 seasons.
Fonterra’s forecast also sets the tone for the NZ industry and some of the other processors are now expected to trim their prices.
Dairy industry analysts have expected Fonterra’s revision based on the string of five reductions in the Global Dairy Trade index since the opening $7 forecast was made in late May.
The cumulative fall in dairy commodity prices over June, July and August was 12%, including whole milk powder down 13%.
The drop in forecast was no surprise, as commodity prices had not supported a $7 payout for most of the season, now three months old, AgriHQ analyst Amy Castleton said.
