7 Dec 2017

Fonterra cuts milk price forecast

8:32 am on 7 December 2017

Fonterra has cut its milk forecast payout to farmers because of volatile prices.

Brighter Future - Dairy. Dairy farming family the Mathieson's, Ewen, Dianne and Melissa talk about the boom and bust of their industry since 2008 and how they got through some of the tougher times.

Photo: RNZ / Rebekah Parsons-King

The co-operative has reduced its forecast by 35 cents to $6.40 per kilogram of milk solids.

The cut was announced in a statement filed to the Australian stock exchange late last night.

Fonterra chairman John Wilson said dairy production remained high in Europe, where there were stockpiles of skim milk powder.

He said the fall in the New Zealand dollar had partly offset the fall in prices but a cut in the forecast was a prudent step.

The milk payout reduction follows Fonterra's cut last week in its forecast dividend by 10 cents because of the $183 million damages award against it over the 2013 botulism scare.

"While the result of the arbitration with Danone has impacted our earnings guidance for the season, it has no influence on our forecast farmgate milk price," Mr Wilson said in a statement.

Meanwhile, Fonterra said its first quarter revenue had risen by 4 percent on last year, but sales volumes and profit margins have fallen because of the wet spring.

Sales volumes were down 20 percent and the gross margin, of 16.7 percent, was also lower.