Dry conditions slow milk supply growth

Dry weather conditions, particularly in the North Island, in mid-December and January had resulted in a slowdown in milk supply growth, Fonterra chief executive Theo Spierings said yesterday.

''We had a strong start to the season and milk collection volumes were running 6% ahead of last season on a year-to-year date.

''However, the dry conditions mean we are currently forecasting total milk collection volumes to finish approximately 1% ahead for the full season,'' he said.

Primary Industries Minister Nathan Guy yesterday declared a state of drought in Northland, with other regions likely to follow soon.

''This is recognition that we are now beyond what is a normal dry summer, and into an extreme climatic event. The entire North Island is extremely dry, but Northland is one of the worst-hit areas,'' Mr Guy said.

Mr Spierings confirmed that Fonterra was keeping its payout forecast range unchanged at $5.90 to $6, before retentions, for farmers with full shareholdings.

Its forecast farmgate milk price for the season was $5.50 per kg of milk solids, unchanged from the previous forecast. Fonterra's forecast earnings per share (eps) remained at 40c to 50c.

Global dairy prices remained relatively flat through December and January, with the global dairy trade-trade weighted index increasing 2% in the period.

The index had since gained 5% in February.

''Given current global conditions, our farmgate milk price forecast anticipates global dairy prices are likely to move higher in the second half of the season,'' Mr Spierings said.

The current farmgate milk price was based on no substantial change to the exchange rate for the rest of the season. If there was a further strengthening of the dollar against the United States currency, that could adversely affect the farmgate milk price, he said.

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