12 Feb 2024

Fonterra lifts milk price forecast as dairy prices rise globally

1:25 pm on 12 February 2024
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Dairy prices are rising worldwide. File photo. Photo: RNZ

Fonterra has lifted its milk price forecast for this season, thanks to rising global dairy prices.

The mid-point is up 30 cents to $7.80 a kilogram of milk solids, while the forecast range for this season is now $7.30-$8.30 per kg of milk solids, up from $7-$8.

Fonterra chief executive MIles Hurrell said the lift in the Farmgate Milk Price came off the back of five strong Global Dairy Trade (GDT) events.

"Recently, we've seen a lift in demand, primarily from the Middle East and South East Asia, for our reference commodity products and this has been reflected in GDT prices.

"Overall GDT prices are up 10 percent since our last Farmgate Milk Price update in December, with whole milk powder prices up 11.5 percent over the same period."

However, he warned the potential impact of geopolitical instability and supply chain disruption on demand from key importing regions remained uncertain.

"We can navigate these dynamics thanks to our scale and our diversification across markets, which provides us with optionality.

"We are also well placed to continue to get the Co-op's product to customers through our partnership with Kotahi."

Federated Farmers dairy spokesperson Richard McIntyre said the increase meant many dairy farmers would now break even this season.

"Fonterra farmers will be walking around with an extra spring in their step this morning after getting that news.

"We all remember back to the dark days ... during calving when the milk price just kept on dropping and farmers were scrambling to try and manage cash flows and trying to find enough money to pay their bills throughout the year so this is obviously quite a significant recovery."

This dairy season runs till the end of May - and Fonterra will announce the final price it will pay to farmers in September.

Fonterra's forecast earnings guidance for FY24 of 50-65 cents per share remains unchanged.

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