Whether Fonterra decides to maintain its forecast farm-gate
milk price at $8.30/kg of milk solids - or lift it - will be
revealed when it gives an update next month.
The co-operative is required to consider its farm-gate milk
price every quarter as a condition of the Dairy Industry
In December, Fonterra unexpectedly left its forecast milk
price unchanged at $8.30 and slashed its dividend by 22c, due
to what it described as an extraordinary situation.
The surprise announcement meant a forecast payout of $8.40/kg
of milk solids for the 2013-14 season, which was much lower
than the predictions of some economists who thought it could
tip the $9 mark, although still a record.
Fonterra attributed its decision to the disparity between
very high milk powder prices, and those for cheese and
In its latest global dairy update, Fonterra said its decision
to leave the forecast unchanged had a positive effect on New
Zealand Milk Products' ebit in the second quarter.
The decision reflected the reality that it was not possible
to lift powder production above current levels because of the
nature of Fonterra's existing production facilities in New
That meant a proportion of milk had to be converted to
non-reference commodity products, predominantly cheese and
casein, which were generating significantly lower returns at
It was a relatively unique situation and Fonterra would
continue to monitor it ''very closely'', the update said.
Milk collection across New Zealand for the eight months to
January 31 reached 1120 million kg of milk solids, 4.2%
higher than at the corresponding period last year.
Rain through December and early January helped maintain milk
production about last season's level with the North Island
3.7% higher and the South Island 5% higher for the season to
The United States Department of Agriculture has revised
upward its 2014 milk production estimate based on the
expectations of a large US dairy herd, and increased
production, later in the year.
A question about increased production lay in California -
home to 20% of US milk production - which was experiencing
its worst drought in a long time, Prof William Bailey, from
Western Illinois University, said in the latest ASB