Dairy giant Fonterra has lifted its forecast farmgate milk price, in a move it says will pump around $450 million into regional New Zealand.
The co-op had been forecasting a range of $6.25 to $7.25 per kgMS for the 2019/2020 season, however has lifted that to a new forecast range of $6.55 - $7.55 per kgMS.
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The advance rate Fonterra pays its farmer owners has been set off the mid-point, $7.05 per kgMS, of the revised range.
Fonterra Chairman John Monaghan said the co-op had been achieving good prices for its milk so far this season.
"Demand for whole milk powder (WMP) has been firm, and for the full season we're expecting it to be above last year. Global WMP production is down year to date and expected to continue to decrease for the remainder of 2019," he said.
"We are also continuing to sell our skim milk powder at higher prices than EU and US dairy companies in Global Dairy Trade (GDT) Events."
Fonterra CEO Miles Hurrell said there were positive signals for the farmgate milk price.
"It is still very early in the season and a lot can change. There are a number of factors we are keeping a close eye on, which is why we've retained a wide forecast milk price range," he said.
He said those factors included global trade tensions and political instability in some key sales regions.
"And, as is always the case, we cannot predict the weather and clearly weather conditions play a big role in global supply," said Hurrell.
Hurrell said the strong demand for the co-op's milk and the prices that were being achieved, relative to other milk-producing regions, demonstrated the rationale of Fonterra's new strategy to prioritise New Zealand milk.
"One of our four priorities is to support regional New Zealand. If you take the $7.05 mid-point of today's revision to our forecast farmgate milk price, it's another $450 million into regional New Zealand.
"The mid-point of the revised range does mean our teams will need to continue to push hard to achieve our margins, but so far we're comfortable with how this season is shaping up in terms of underlying business performance."
Fonterra posted an annual loss of $605 million for the 2019 financial year with a farmgate milk price $6.35 per kgMS.
It announced a new strategy, operating model and changes to its management team to try and turn around its financial fortunes.