Milk Glut Drags Fonterra Forecast Down to $9.20/kgMS
A milk glut around the world shows no sign of easing, putting downward pressure on farmgate milk prices for the next few months.
When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total pay-out available to farmers in the current season is forecast to be $6.50 to $6.60 before retentions.
Fonterra is required to consider its forecast farmgate milk price every quarter as a condition of the Dairy Industry Restructuring Act.
Fonterra chairman John Wilson says the cooperative is confident that this forecast is at the right level, following the 75 cent rise in its forecast Farmgate Milk Price in November last year.
“The global outlook for dairy remains positive. Since November, the global market for commodity dairy products has remained relatively balanced and we expect global prices to continue to hold or gradually increase over the back half of this season – a view shared by most global analysts,” says Wilson.
Fonterra also announced that it would increase the monthly Advance Rates it pays to farmers. The Advance Rate for February, paid in March, has increased to $4.85/kgMS.
“Our confidence in the global dairy market at this stage of the season, combined with the strength of our cooperative, has enabled us to increase the monthly Advance Rates more than we normally would at this time of the year,” says Wilson.
Fonterra’s Global Dairy Update for February reported that the cooperative’s New Zealand milk collections were showing signs of recovery. Originally expected to be down 7% for the season, the New Zealand collections forecast has now improved to a 5% decline on last season.
