Fonterra optimistic as milk price increases

23-May-2017 - Last updated on 24-May-2017 at 10:43 GMT

Fonterra has increased its forecast farmgate milk price.

Related tags Farmgate milk price Milk Dairy farming

Fonterra Co-operative Group has increased its 2016/17 forecast Farmgate Milk Price to NZ$6.15 (US$4.31) per kgMS.

Chairman John Wilson said world dairy prices have risen in recent months, and the company is confident of the $6.15 price.

Fonterra has also confirmed its forecast earnings per share range of 45 to 55 cents (32 to 39 cents US) for the 2017 financial year, as it continues to target a dividend of 40 cents (28 cents US) per share.

Wilson said while third quarter challenges could continue, a strong fourth quarter in ingredients’ sales is anticipated.

Fonterra is forecasting an improved Farmgate Milk Price of NZ$6.50 (US$4.56) per kgMS for the 2018 season. The forecast earnings range for the 2018 financial year will be announced around the beginning of August.

“Stronger production in March and April has partly offset lower peak milk production and collections are now expected to be down 3% for the season, a much better outcome for our farmers than had been anticipated earlier in the year,” Wilson said.

Third quarter update

Fonterra’s revenue of NZ$13.9bn for the first nine months of 2016/17 is up 8% on the same period last year, as a result of higher milk prices.

Chief executive officer Theo Spierings said margins in most of the company’s businesses are similar to last year, and an additional 350m liquid milk equivalent (LME) has been moved into higher value products in the year to date.

He added consumer and foodservice volumes in Greater China have grown by 40% in the period.

“We are on track to exceed our target of moving an additional 400m LME into higher value products by year-end,” Spierings said.