What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The co-operative has also revised its forecast milk collections to the 2022/23 season down from 1,510 million kgMS to 1,495 million kgMS.
Fonterra chief executive Miles Hurrell says the lift in forecast earnings is a continuation of the ongoing strong demand for dairy that saw Fonterra confirm its FY22 earnings were at the top end of the guidance range.
“The demand signals we saw at the end of FY22 have continued driving improved prices and higher margins across our portfolio of non-reference products, particularly in cheese and our protein products such as casein,” Hurrell says.
He says the co-op sees strong underlying demand and the latest lift in whole milk powder prices on the GDT auction platform as a positive signal, reversing the easing in the prices that drive its Farmgate Milk Price.
“Strong offshore prices for protein, as reflected in the recent increase in EU and US milk prices, mean our protein portfolio has been performing very well.
“This sustained period of favourable pricing relativities between our protein and cheese portfolios and whole milk powder is the main driver for the increase in the FY23 earnings guidance range being announced today. If these unprecedented conditions were to continue for a further extended period this could have an additional positive impact on forecast earnings.”
Hurrell says Fonterra remains committed to its 2030 targets and expects variable market conditions as it works towards them.
“The benefit of being part of the Co-op is having a diversified organisation with an extensive portfolio of products which allow us to capture value in a broad range of market conditions, benefiting both farmer owners and unit holders.”
He says the co-op is comfortable with its FY23 contracted rate, particularly for its protein portfolio, at this stage of the season but, he says, it is still early days.
“Our strategy is based on growing demand, constrained supply and shifting our farmers’ milk into higher value products, all of which are currently being realised.”
