Fonterra lifts FGMP forecast after increase in global dairy prices

By Mark ASTLEY contact

- Last updated on GMT

Fonterra lifts FGMP forecast after increase in global dairy prices

Related tags: Milk

Fonterra has increased its farm gate milk price (FGMP) forecast for the 2015/16 season following a recent lift in global dairy prices. 

New Zealand dairy Fonterra announced last week it has increased its FGMP forecast for the 2015/16 season by NZ$0.75 to NZ$4.60 per kilogram of milk solids (kgMS).

Fonterra announced an opening FGMP forecast for the 2015/16 season of NZ$5.25 per kgMS. In August, it slashed its estimate to NZ$3.85 per kgMS.

Last week's FGMP forecast increase reflects the lift in global dairy prices since July, Fonterra said.

The Global Dairy Trade (GDT) Price Index, a weighted average of percentage changes in dairy commodity prices on the Fonterra owned platform, has risen 42.2% over the last three auctions.

“Current global prices are unsustainable,”​ said John Wilson, chairman, Fonterra. “While there are signs that supply growth globally is easing, a lift in demand, which is needed for prices to continue to rise, is still to come."

With forecast earnings per share of between NZ$0.40 and NZ$0.50, Fonterra’s forecast total payout for the 2015/16 season stands at between NZ$5.00 and NZ$5.10.

Meanwhile, Fonterra has lowered its production forecast for the 2015/16 from the 1.589bn kgMS it announced in May. It collected 1.614bn kgMS of milk in New Zealand last season - up 2% on 2013/14.

"We are 5% behind last season to date and are currently tracking 8% down on last season on a weekly basis,"​ said Wilson. 

"Farmers are responding to the tough economic conditions and with cow numbers down, less supplements being fed and challenging weather conditions for much of the country, we now expect production to be down by more than 5% for the season."

Stronger H2 performance

Last week, Fonterra also published its financial results for the year ended July 31 2015.

It reported revenue of NZ$18.8bn for the year - down 15%.

Net profit after tax, however, increased 183% to NZ$506m.

Fonterra CEO, Theo Spierings, attributed the result to a stronger second half performance. 

"Significant progress was achieved in our consumer and foodservice strategy where we are aiming to win hearts, minds and especially market share in our eight strategic markets of New Zealand, Australia, Sri Lanka, Malaysia, Chile, China, Brazil and Indonesia,​" said Theo Spierings, CEO, Fonterra.

"With the reorganization of Dairy Partners Americas completed, consumer and foodservice volumes were up a significant 27% to 1.7m tonnes."

"Our Asia and Greater China consumer and foodservice businesses, which source most of their milk from New Zealand, were also important contributors to this result," ​Spierings added.

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1 comment

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Posted by bharat Nimbalkar,

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