Fonterra Co-operative Group has increased its 2019/2020 forecast farmgate milk price range after achieving firm prices for its milk so far this season.
The New-Zealand dairy cooperative has increased the rate it pays its farmers to procure milk to between $6.55 and $7.55 per kg of milk solids (kgMS) from $6.25-7.25 per kgMS that it had forecast earlier this year.
Fonterra has reported that its advance rate that it pays its farmer owners will be set off the mid-point of the revised range at $7.05 per kgMS.
Fonterra Chairman John Monaghan said: “Demand for whole milk powder has been firm, and for the full season we’re expecting it to be above last year.
“Global whole milk powder production is down year to date and expected to continue to decrease for the remainder of 2019. We are also continuing to sell our skim milk powder at higher prices than EU and US dairy companies in global dairy trade events.”
The rise in guidance follows the dairy cooperative’s report of an annual loss of NZD 605 million ($380.1 million) for the year to July as a result of a series of write-downs across its business. In response to its loss, Fonterra established a new organisational structure and refreshed strategy to prioritise New Zealand milk.
Fonterra CEO Miles Hurrell, who has overseen much of the recent change in strategy has said these changes explain the strong demand for the co-ops milk. He said while there are positive signals for milk price, global trade tensions and political instability in some of the key sales region have led to the retained wide forecast milk price range.
Hurrell added: “One of our four priorities is to support regional New Zealand. If you take the $7.05 mid-point of today’s revision to our forecast farmgate milk price, it’s another $450 million into regional New Zealand.
“Our earnings outlook for FY20 is based on a forecast Farmgate Milk Price, which still falls within our new forecast range of $6.55 – $7.55 per kgMS.
“The mid-point of the revised range does mean our teams will need to continue to push hard to achieve our margins, but so far we’re comfortable with how this season is shaping up in terms of underlying business performance.”
© FoodBev Media Ltd 2019