Fonterra lifts forecast milk price

Fonterra says the increased price reflects improvements in global markets (Getty)
Fonterra says the increased price reflects improvements in global markets (Getty)

Fonterra has again lifted its forecast milk price.

It is increasing it by 75 cents to $6.00 per kilogram of milk solids.

The cooperative says that combined with forecast earnings per share of 50 to 60 cents this would mean a total available payout to shareholder farmers of between $6.50 and $6.60.

However, a portion of the earnings will be retained to allow Fonterra to reinvest in its value add business.

Chairman John Wilson said the decision to increase the forecast farmgate milk price reflects improvements in global pricing since September (when Fonterra lifted the forecast farmgate milk price by 50 cents to $5.25).

"We've seen falling production in the major exporting regions, particularly Europe and Australia, and an unprecedented decline in New Zealand milk supply due to wetter than normal spring conditions across most regions. On balance, demand continues to be firm. As a result there has been a steady improvement in global dairy commodity prices and this is reflected in the improved forecast.

"We are very mindful that farm incomes will be affected this year because of lower milk production so we will be doing everything possible to build on our good start to the financial year and deliver the highest possible total payout to our farmers."

Fonterra says its first quarter revenue of $3.8 billion is up six percent on the same period last year. Sales volumes are up two percent to 4.9 billion litres liquid milk equivalent (LME), while the gross margin of 22 percent remains largely unchanged.

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