Fonterra raises farmgate milk forecast as global dairy improves
New Zealand dairy giant Fonterra on Thursday lifted its farmgate milk price forecast to NZ$4.75 as global dairy prices began to improve and supply slowed.
The dairy co-operative lifted the forecast by NZ$0.50, and continued to forecast earnings per share at between NZ$0.50 to NZ$0.60, which brought the total payout available to farmers in the 2016-17 season to NZ$$5.25 to NZ$5.35.
The move put the payout above the industry's estimated break-even level of NZ$5.05, suggesting that the recovery of global dairy prices would filter through to New Zealand farmers.
"Current global milk prices remain at unrealistically low levels, but have started to improve as global demand and supply continue to rebalance," said Fonterra Chairman John Wilson in a statement.
Milk production in the European Union was falling and New Zealand milk production was around 4 percent lower for the current season, Fonterra said.
However Fonterra cautioned that the dairy market would likely remain volatile and the forecast would continue to be updated.
Fonterra had earlier this month held its farmgate milk forecast steady at NZ$4.25, saying the price had reflected global uncertainty and a high New Zealand exchange rate.
Since that time, international milk prices have rallied, with the Global Dairy Price Index, which covers a variety of products, soaring 12.7 percent, with an average selling price of $2,731 per ton, in an auction held last week.
($1 = 1.3748 New Zealand dollars)
