Positive news expected in Fonterra result

A senior rural economist is predicting positive news for farmers when Fonterra announces its Q3 financial results on Thursday.

The ASB's Nathan Penny said he expects Fonterra to lift its 18/19 milk price towards the upper end of its current $6.30 to $6.60/kg range.

"For our part, we have pencilled in $6.60/kg," he said.

He said the likely lift follows the overall lift in dairy auction prices since Fonterra's last update in February. 

Global milk commodity prices have recorded eleven consecutive rises, although fell modestly on Wednesday.

"Overall dairy auction prices and whole milk powder prices have both lifted over five percent in USD terms," said Penny.

Nathan Penny is expecting a positive milk forecast from Fonterra.
Nathan Penny is expecting a positive milk forecast from Fonterra. Photo credit: Newshub

He said the auction price lift had been further boosted by the NZD/USD weakening by around five percent over the same period. 

Meanwhile, Penny said things were looking good for the new 2019/20 season.

"We expect Fonterra to set its opening forecast at a healthy level somewhere near the $7.00/kg mark."

"Global dairy supply is tight, with all major exporters struggling to grow supply.

We anticipate that NZ 2019/20 season production will be unchanged from 2018/19." 

He said global demand was firm, with Asian, including Greater China, demand robust.

The bank had set its 2019/20 forecast at a $7.00/kg. 

Fonterra last week announced the sale of ice cream company, Tip Top to UK-based Froneri, owned by Nestle and R&R Ice Cream, for $380 million.

The dairy giant is looking to slash debt by $800 million, and turn its performance around after posting a net loss of $196 million for the year ending July 2018.