Fonterra lifts forecast payment to farmers

Tuesday 22nd September 2009

Fonterra Cooperative Group, the world’s largest exporter of dairy products, raised its forecast 2010 milk payment, citing an improved outlook for global prices.

The cooperative raised its expected milk price payment by 60 cents to $4.60, while trimming its value return payment, or distributable profit, by 5 cents to 50 cents per kilogram of milk solids. The net increase is 55 cents to a higher-than-expected $5.10.

“What we’re seeing in the international market is the firming of a trend, with a more positive sentiment and stronger demand, producing better pricing across the board,” said chief executive Andrew Ferrier. “Whole milk powder prices have been leading the way, with the prices for other dairy commodities now all moving in the right direction.”

Prices have surged 55% in Fonterra’s last two monthly online milk powder auctions, helping extend a resurgence after a tumble through late last year and early 2009. Fonterra last week announced plans to raise more equity from its farmers and stabilise its balance sheet.

The three-stage plan will allow farmers to hold shares up to 120% of the production, allow them to trade the stock among themselves an eventually see Fonterra exit its role in buying and redeeming the securities.

Ferrier said the improved forecast does come with a rider. “We remain in a period of extreme price volatility, which makes forecasting challenging, to say the least.”

The increase in the milk price reflects a pick-up in whole milk powder prices while the decline in the expected distributable profit reflects weaker prices for cheese and casein products.

Chairman Henry van der Heyden said the resilient New Zealand dollar, which is holding above 70 US cents, has been “fully factored” into the forecast payment.Fonterra is due to post its annual results tomorrow.

Businesswire.co.nz

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