Fonterra predicts reduction in milk collection

01-Aug-2016 - Last updated on 02-Aug-2016 at 14:05 GMT

Fonterra notes that less milk is being produced globally, and that there is progress being made from converting milk into higher-returning products.

Related tags Farmgate milk price New zealand Milk

Fonterra Co-operative Group Limited says there is no change to its forecast farmgate milk price, and that less milk is being produced globally.

The New Zealand company announced a forecast earnings per share range for the 2017 financial year of NZ$0.50 ($0.36) to NZ$0.60 ($0.43), while the forecast Farmgate Milk Price has been maintained at NZ$4.25 ($3.06) per kilogram of milksolids (kgMS).

This makes the total payout available to farmers in the 2016/17 season NZ$4.75 ($3.42) to NZ$4.85 ($3.50).

Chairman John Wilson said the forecast is a best estimate at this early stage of the season.

Less milk production

Wilson said the NZ$4.25 Farmgate Milk Price reflects continuing global uncertainty and the high NZD/USD exchange rate, which continues to impact the competitiveness of New Zealand dairy exports.

“The recent weakening of the Euro, combined with the continued strength of the New Zealand dollar, has meant a price advantage for European export dairy products,” Wilson said.

He added that there was an expectation that global milk supply and demand would come into balance over the course of this season, noting that farmers globally are producing less milk in response to lower prices.

“We are forecasting a 3% reduction in our New Zealand milk collection for this season.”

Converting milk grows business

Chief executive Theo Spierings said the returns from the ingredients, consumer and foodservice businesses continue to grow in line with Fonterra’s business strategy to convert more milk into higher-returning products.

“Our good progress in continuing to increase value through our consumer and foodservice businesses, particularly in important markets such as China, Malaysia, Indonesia, Sri Lanka, Oceania and Latin America, is reflected in the lift in the earnings per share forecast,” Spierings said.