Fonterra lifts forecast milk price 50 cents to $4.75/kgMS

Thursday 25th August 2016

Fonterra Cooperative Group has raised its forecast payout to farmers by 50 cents as global dairy prices have started improving from what it describes as "unrealistically low levels".

The Auckland-based company forecasts it will pay $4.75 per kilogram of milk solids in the 2017 season, up from a previous forecast of $4.25, it said in a statement. Combined with the forecast 50-to-60 cents of earnings per share, the total payout before retentions is expected to be between $5.25 and $5.35. Chairman John Wilson said global milk prices were still at "unrealistically low levels", but had started to pick up.

"Milk production is reducing in most dairying regions globally in response to low milk prices and this is bringing the world's milk supply and demand back into balance," Wilson said. "We expect the dairy market to be volatile over the coming months and will continue to keep our forecast updated for our farmers as we move into the season."

Dairy farmers have been facing their third season where milk prices have been below the average break-even mark, though recent auctions on the GlobalDairyTrade platform have been recovering from their lows and at the last event whole milk powder prices jumped 19 percent.

Wilson said the strong kiwi dollar had eroded some of the recent gains in prices, though the kiwi didn't have a strong response to today's announcement, recently trading at 73.14 US cents from 73.06 cents immediately before the release.

Separately, NZX said the recent price gains on the GDT platform had driven activity in the trading of its milk futures derivatives, exceeding the stock market operator's expectations with more than 10 million kilograms of milk solids product traded since the product launched three months ago.

BusinessDesk.co.nz

Comments from our readers

No comments yet