Fonterra has increased its 2018/19 forecast Farmgate Milk Price range to $6.30-$6.60 per kilo of milk solids (kgMS), up from $6.00-$6.30, and revised its forecast earnings down to 15-25 cents per share.
The co-operatives chair John Monaghan says the improved milk price forecast reflects the increases in global milk prices over the last quarter.
“Since our last milk price update in December, global demand has strengthened. This is driven predominantly by stronger demand from Asia, including Greater China. The European Union’s (EU) intervention stocks of skim milk powder (SMP) have also now cleared for the season and, as a result, we expect demand for SMP to be strong.
“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 – in particular, Australia’s milk production is forecast to be down 5-7% on last season and the EU’s growth has slowed and is now forecast to be less than 1% up on last year.
“Here in New Zealand, due to hot, dry weather since the start of the year, we’ve revised our Co-op’s forecast milk collections down from 1,550 million kgMS to 1,530 million kgMS. This is up 2% 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 over the last six GDT events.
“We expect demand to remain stronger relative to supply for the rest of the season.”
The DIRA milk price and the advance rate paid to farmers have been set off a milk price of $6.45 per kgMS.
Fonterra is also advising its farmers and unit holders that its forecast earnings range has been reduced to 15-25 cents per share and that it will not be paying an interim dividend.
A decision on any full year dividend can only be made at the end of the financial year, and will depend on the Co-op’s full year earnings and balance sheet position.
