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Fonterra managing director Theo Spierings with farmer Gerard van Beek.
The global supply/demand is beginning to rebalance, says Fonterra chairman John Wilson.
It is driven mainly by farmers responding to lower milk prices and cutting back production; major suppliers Europe and Australia are producing less milk. And the wetter spring in New Zealand has seen milk production fall 5.7% from levels last year.
Speaking to Fonterra shareholders at its annual meeting last week, Wilson said demand is growing at an average of 2% in key markets. Demand for dairy in China is growing, however it remains patchy in oil producing countries reeling under low oil prices.
In November Fonterra revised its forecast payout – a 75c increase in milk price to $6/kgMS and a dividend payout of 50c-60c. The revision reflects the rebalancing of demand and supply, Wilson says, and though the co-op expects returns to remain volatile it is maintaining its 50-60c range dividend.
Wilson says despite the rise in forecast payout, Fonterra is aware of the poor start to the season.
“For many businesses a lot of catch-up is required given the two poor seasons many have endured.”
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The important whole milk powder price has risen 4.9% to $US3593 a tonne, comfortably in the break-even range for farmers who budget on about $US3000 a tonne to cover their cost of production.
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