Fonterra has bumped up its forecast milk price for
2013-14 another 30c to $7.80 per kg of milk solids, citing
continuing strong international prices for dairy.
The increase, along with a previously announced estimated
dividend of 32c per share, amounted to a forecast cash payout
of $8.12. In late July, Fonterra lifted its forecast 50c from
As a ''rough rule of thumb'', each 10c change in the milk
price was worth $150 million in farm-gate revenue, ASB chief
economist Nick Tuffley said.
The latest revision implied additional on-farm revenue of
$450 million, with the combined revisions to date worth $1.2
A $7.80 forecast, combined with an estimated 2% production
increase, implied a $3.15 billion farm-gate revenue increase
from last season, when the milk price was $5.80 a kg, Mr
Yesterday's announcement was positive news after what has
been a difficult few weeks for the dairy giant after the whey
contamination scare, which attracted international headlines
and prompted a ministerial inquiry.
There have also been issues in Sri Lanka, Fonterra rejecting
allegations its products contained dicyandiamide (DCD), a
nitrification inhibitor used by the dairy industry to reduce
nitrate leaching into waterways and greenhouse gas emissions.
While there had been some fallout from the whey contamination
scare, it had not been enough to have a noticeable impact on
prices and trade disruption had also been minor to date, Mr
''We saw the previous milk price as comfortably achievable
even if global prices had moderated over the rest of the
''This new price would also still be achievable if prices
moderated slightly over the rest of the season,'' he said.
Fonterra chairman John Wilson said current market views
supported commodity prices remaining at historically high
levels longer than previously forecast.
The two most recent GlobalDairyTrade events had seen prices
hold and significant volumes sold, contributing to the
updated forecast, Mr Wilson said.
Fonterra achieved its highest-ever monthly revenue through
the auction platform in August, selling 109,664 tonnes of
product worth $685 million.
There would be no change to the advance rate announced in
July, which started from $5.50kg/ms, as there were ''a number
of uncertainties'' at this early stage in the season, he
An update on business performance would be provided when the
co-operative announced its annual result on September 25.
In July, the increase in the forecast was described as an
''overdraft clearer'', allowing farmers to pay back credit
lines extended to them during the drought.
Fonterra is required to consider its farm-gate milk price
every quarter as a condition of the Dairy Industry
Restructuring Act (DIRA).