Fonterra's forecast for milk payouts looks brighter

Fonterra said the strong result reflected the execution of its strategy, against a backdrop of...
Photo: Reuters
Fonterra has raised its forecast milk payout by 50 cents, on the back of an improved outlook.

The new forecast range is $6.50 to $8 a kilogram of milk solids, with a mid-point of $7.25. The payout for last season was $8.22 per kg.

Fonterra chief executive Miles Hurrell said the increased forecast came from changing market conditions.

"Here in New Zealand, we're forecasting collections to be slightly below last season, while aggregate milk growth in key export countries is expected to be below average," Hurrell said.

"The El Niño weather pattern may have further impacts on supply and this could be driving recent buyer sentiment."

Prices also improved in recent auctions, as Chinese purchasers started to increase their buying, he said.

"While this has been encouraging, it is not yet clear whether the stronger demand from China will be sustained.

"For other key regions, customers remain relatively cautious in terms of their forward purchases."

Hurrell said commodity prices remained volatile as did the exchange rate, which would influence the season's outcome.

"We'll continue to let our farmers and the market know as soon as we can, when we think things have materially shifted."

Fonterra recently posted a record $1.6 billion profit, helped in part by a lower cost of raw materials, although it allowed a bumper dividend to farmer shareholders.

 

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