The Fonterra farmgate milk price range has increased from $6.30 to $6.60 (€3.79 to €3.97) per kgMS for the 2018/19 season. This is up from from $6.00 to $6.30 (€3.61 to €3.79). However, it has revised its forecast earnings down to between 15c and 25c per share (€0.09 to €0.15 per share).
Fonterra expects that milk volumes will be up by 2% on last year.
Chair John Monaghan says the improved milk price forecast reflects the increases in global milk prices over the last quarter.
“Since our last milk price update in December, global demand has strengthened. This is driven predominantly by stronger demand from Asia, including Greater China,” he said.
“The European Union’s (EU) intervention stocks of skim milk powder (SMP) have also now cleared for the season and, as a result, we expect demand for SMP to be strong.”
Since our last milk price update in December, global demand has strengthened
Australia’s milk production is forecast to be down 5% to 7% on last season and the EU’s growth has slowed and is now forecast to be less than 1% up on last year.
“Here in New Zealand, due to hot, dry weather since the start of the year, we’ve revised our co-op’s forecast milk collections down from 1,550m kgMS to 1,530m kgMS. This is up 2% on last year,” Monaghan said.
“We expect demand to remain stronger relative to supply for the rest of the season.”
However, Fonterra says that earnings performance in the co-op is not satisfactory and “a fundamental change in direction” is needed to deliver on its full potential.
“We are taking a close look at our business with our portfolio review, where we can win in the world, and the products and markets where we have a real competitive advantage,” Monaghan said.
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