Dairy farmers are hoping Fonterra will lift its milk price forecast next month after the dairy giant left it unchanged this week at $4.70.
While dairy commodity prices had gone up recently, the increase was not sufficient to raise the forecast farm-gate milk price for the 2014-15 season ''at this time'', Fonterra chairman John Wilson said yesterday.
Since December, GlobalDairyTrade auction prices for whole milk powder and skim milk powder had increased 45% and 13% respectively.
But significant volatility continued in international commodity prices.
New Zealand volumes were down and there was continued uncertainty in production due to drought in Canterbury, Marlborough and parts of Otago, Mr Wilson said.
The forecast reflected the board and management's ''best estimates at this time''. Farmers were advised to continue to be cautious with budgeting.
Chief executive Theo Spierings said Fonterra was sticking to its strategy with confidence in the long-term fundamentals of dairy demand.
A full business update would be provided when Fonterra reported its interim result on March 25, he said.
With two more GlobalDairyTrade auctions before then, Westpac senior economist Michael Gordon said an upgrade to the forecast might be seen at that date, depending on how prices performed in those auctions.
North Otago Federated Farmers dairy chairman Lyndon Strang said there had been some ''really mixed messages'' from industry commentators, before Fonterra's announcement, some touting an increase to $5 and others a drop as low as $4.35.
Personally, Mr Strang thought it would at least stay the same, although he hoped it could be up to the $4.90-$5 range.
A prudent and cautious approach by Fonterra was understandable and he wondered if the co-operative was possibly saving a lift until the next review, so there was ''a little bit more certainty''.
While there had been a ''nice few rises'' in auction prices, another one or two were needed to really provide some certainty, he said.
When it came to how dairy farmers were coping with the dry weather, he said most were ''soldiering on''.
They were making decisions, including looking at drying cows off early and getting rid of cull cows earlier.
''You feel for the ones that are first year in ... those guys are going through a bit of pain,'' Mr Strang said.
Fonterra Shareholders Council chairman Ian Brown said the announcement would be a relief for farmers.
''On-farm conditions have been really tough throughout the country and farmers will be pleased that the recent downward trend has stopped.''
Farmers would be looking ''with great interest'' when the forecast dividend was announced next month.
''Our farmers will want to see the strategy, which is key to adding value long-term, deliver a return relative to the significant investment they have made and continue to make in their co-op,'' he said.
Along with the previously announced estimated dividend range, a $4.70 milk price amounted to a forecast cash payout of $4.95-$5.05 for the season.
Rabobank's latest agribusiness monthly said a major recovery in global commodity markets was still a few months away.
Supply was still readily available in most key export regions, although production growth was now slowing.
China remained mostly sidelined from the market, as it contended with slowing local demand growth and a better-than-expected recovery in local milk supply, resulting in discounted products being offered at retail for consumers.
