Fonterra raises forecast milk price

New Zealand dairy co-operative Fonterra has increased the 2019/2020 forecast farmgate milk price range after achieving good prices for milk this season.

The guidance range has increased from $6.25 – $7.25 per kgMS to $6.55 – $7.55 per kgMS.

The advance rate Fonterra pays farmers will be set off the mid-point ($7.05 per kgMS) of the revised range.

“Demand for whole milk powder (WMP) has been firm, and for the full season we’re expecting it to be above last year,” Fonterra chairman John Monaghan said.

“Global WMP production is down year to date and expected to continue to decrease for the remainder of 2019.”

Monaghan said the dairy exporter is continuing to sell skim milk powder at higher prices than EU and US dairy companies in Global Dairy Trade (GDT) events.

Fonterra chief executive Miles Hurrell said there are positive signals for milk price but warned that it is still early 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,” Hurrell said.

“These factors include global trade tensions and political instability in some of our 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.”

The revised guidance comes just a month after Fonterra announced a turnaround plan in which it pledged to focus on domestic milk production.

“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,” Hurrell said.

He said Fonterra’s teams will need to push hard to achieve its margins, but said he is comfortable with how the season is shaping up in terms of underlying business performance.

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