Fonterra Co-operative Group has announced that it is reducing last season’s forecast farmgate milk price to $6.70/kg MS (€3.86) from $6.75 (€3.89).

“You never want to have to reduce the milk price at the end of the season, but it is the right thing to do and $6.70 remains a strong milk price,” Fonterra chair John Monaghan said.

“It is important for our co-operative to have a strong balance sheet and, as we indicated in May, the higher milk price – which is good for our farmers – has put pressure on Fonterra’s earnings, and therefore our balance sheet – in a year that was already challenging due to the payment to Danone and the impairment of the co-operative’s Beingmate investment.”

Fonterra was forced to accept a write down of $405m earlier in the year in its investment in the Chinese infant formula company Beingmate.

Milk suppliers

In an email to its milk suppliers, Fonterra wrote: “Your board has made the tough, but necessary decision to reduce the 2017/2018 forecast farmgate milk price to $6.70/kg MS from $6.75/kg MS.

"We have held our normalised earnings per share guidance at the previously announced 25-30c guidance range, but we expect it will be at or slightly below this range.

“There is no change to the new season forecast farmgate milk price of $7.00/kg MS.”