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Fonterra affirms milk price forecast, expects range to narrow

Wednesday 4th September 2019

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Fonterra Cooperative Group maintained its milk forecast payout at $6.25-7.25 per kilogram of milk solids for the current season but expects that range to narrow as it gains certainty on production and sales.

"The global dairy market remains largely in balance, but is not without some risk. We are keeping a close eye on international trade tensions and geopolitical risks. The weakening Chinese currency means less consumer purchasing power for USD-priced dairy products like ours. There is also continuing volatility in the price of dairy fat," Fonterra said in a statement to the stock exchange.

Fonterra said it has only collected about 2 percent of the forecast full season milk volumes, "so we are retaining a range of +/- 50c per kgMS. As the season progresses and we get greater certainty on production and sales, this range will narrow."

The update comes ahead of next week's annual earnings announcement where the dairy exporter will unveil an annual loss of as much as $675 million after writing down the value of global assets. It will also set the final 2018/19 farmgate milk price at its annual result on Sept. 12. Its latest forecast in May was $6.30-6.40/kgMS. 

Fonterra noted good whole milk powder demand for the current season and said global milk supply growth is slowing and international whole milk powder production expectations are falling.

The GDT price index fell 0.4 percent in the overnight Global Dairy Trade auction. Whole milk powder prices fell 0.8 percent to US$3,076 a tonne. Analysts had expected a fall of about 1 percent. 

Units in the Fonterra Shareholders' Fund last traded at $3.30 and are down 29 percent this year. Farmer-owned Fonterra shares were also at $3.30 and have shed 29 percent so far this year.


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