"Forecast pricing looks firm," says Westland chief executive Rod Quin. "But the New Zealand dollar is showing considerable volatility, which is why there is a forty cent range in the prediction."
Quin says international demand is still being driven by China but there's strong demand across all key markets.
"Milk powders are still returning better than protein powders but the gap is closing."
Earlier this month Fonterra held its forecast at $8.30/kgMS despite a theoretical milk price of $9/kgMS being achievable according to the Milk Pricing Manual which is used to monitor its pricing. At the same time it slashed its dividend forecast from 30c/share to 10c.
"Fonterra's actual asset base includes a number of cheese and casein manufacturing plants which means that we are not able to maximise profits from these plants in the current environment," explained Fonterra chairman John Wilson in its December 11 announcement.
Westland says its production is up 16% on the season to date compared with last year and on budget. It has 34 suppliers in Canterbury this season, up from 14 last year, as well as its core 300 or so West Coast members. Canterbury milk is now 18% of its intake by volume.
A new nutritionals plant commissioned at the beginning of 2013 is paying dividends, says Quin.
"Infant formula demand remains very strong particularly in China despite recent events."
Westland is well positioned to work within new rules being implemented in China and the Chinese Government driven push to consolidate the supply base thanks to Westland's relatively high milk growth and the wider range of product options available as a result of its investments in recent years, he adds.
Earlier this week prices of anhydrous milk fat, butter, milk protein concentrate and a few other products were up on Fonterra's fortnightly Globaldairytrade auction, offsetting 1.5% and 1.7% falls in whole milk powder and skim milk powder respectively to leave the auction index up 0.2%.
Westland is New Zealand's second biggest dairy cooperative, behind Fonterra, and third largest dairy exporter.
Westland's highest pay-out was in 2007-08 when it surpassed Fonterra, paying $8.29/kgMS.
