Buoyed global dairy prices and decreased production worldwide have prompted Canterbury-based Synlait to raise its 2016-17 forecast milk price by 25c, to $6.25.
The 1.3% overall gain in this week’s Fonterra GlobalDairyTrade auction also prompted some economists to restate their 2016-17 forecasts. Westpac was comfortable on $6.20 and ASB holding at $6.50. Fonterra remained on $6, for the present.
Synlait managing director John Penno said after two "challenging seasons" in which many dairy farmers were below break-even point, it was good news they were returning to a financially sustainable milk price.
"Our milk suppliers will soon be turning their attention to the off season and this announcement will give them confidence with their cash flow planning," Mr Penno said.
Synlait has more than 200 dairy suppliers and processes more than 550million litres of milk annually.
Its shares were up almost 1% at $3.18 after the announcement.
Craigs Investment Partners broker Chris Timms said "given no-one wants to be too far out of the ball park", he expected Fonterra would be reconsidering its forecast payout.
"Synlait have obviously got the confidence," he said.
However, Synlait chairman Graeme Milne sounded a note of caution, saying that the industry still had to work its way through existing inventory in the supply chain, which had remained higher than expected.
