NEW Zealand dairy giant Fonterra Co-op, citing rising global milk
prices, raises its current-sea-son forecast gate milk price range to NZ$6.30-NZ$6.60 (£3.24-£3.40) a kilogram of milk solids.
And while that’s up from $6.00-$6.30 (£3.09-£3.24), the co-op has lowered its forecast earnings to 15-25 cents (7.7p-12.9p) a share and it will not be paying an interim dividend.
A decision on a full-year dividend will depend on earnings and the balance sheet.
Chairman John Monaghan says the forecast payment to its farmers reflects increases in global milk prices over the last quarter.
“Since our last milk price update in December, global demand has strengthened,” he says. “This is driven predominantly by stronger demand from Asia, including Greater China.
“The European Union’s intervention stocks of skim milk powder (SMP) have also cleared for the season and, as a result, we expect demand for SMP to be strong.”
Monaghan says global supply remains above last season’s levels, but growth has slowed due to challenging weather conditions in some of the world’s largest milk producing regions.
With hot, dry weather since the start of the year, Fonterra has lowered the co-op’s forecast milk collections from 1,550 million kgMS to 1,530 million kgMS – still up two per cent on last year.
“We’ve seen the positive impact of this supply-demand picture on a couple of fronts – the number of bidders and, more importantly, prices for the reference products that make up our milk price have increased,” Monaghan says.