Fonterra lifts farmgate milk price to record level; sees $13.2b economic boost

Fonterra expects to pay its farmer suppliers a record price for their milk this season, providing a boost to the economy of more than $13.2 billion.

Christel Yardley/Stuff

Fonterra expects to pay its farmer suppliers a record price for their milk this season, providing a boost to the economy of more than $13.2 billion.

Fonterra has lifted its milk payment to farmers for this season to the highest level since it was founded 20 years ago, which it expects will contribute more than $13.2 billion to the economy.

The co-operative on Friday lifted and narrowed its forecast for the 2021/22 season a second time, and is now expecting to pay its farmer suppliers between $8.40 and $9 per kilogram of milk solids. That’s up from its forecast in late October of between $7.90 and $8.90 per kgMS.

The midpoint of the range, which farmers are paid off, increased to $8.70 per kgMS from $8.40 per kgMS, and would be the highest level since Fonterra was formed in 2001.

Global dairy prices have been supported this season by weaker milk production due to poor weather and higher feed costs. Fonterra’s New Zealand milk supply is down about 3 per cent on the same time last season but improving weather conditions means the co-operative has retained its expectation for milk collections to fall to 1,525 million kgMS this season from 1,539 million kgMS last season.

READ MORE:
* Fonterra lifts farmgate milk price to highest level in 20 years; sees $13.2b economic boost
* Fonterra expected to pay highest milk price since it was formed 20 years ago
* Fonterra dairy farmers on track for record milk price; with $13b economic boost

The milk payment would be an important boost to New Zealand communities, said Fonterra chief executive Miles Hurrell.

“It’s the result of consistent strong demand for dairy at a time of constrained global supply,” he said.

“While we’ve seen demand soften slightly in China, global demand remains strong, and we think that will remain the case for the short to medium term.”

The higher milk price has seen the co-operative reduce the top end of its earnings guidance to 25-35 cents per share from 25-40 cents per share.

“A higher forecast farmgate milk price at this level can put pressure on our margins and therefore our earnings, which is why we’ve reduced the top end of our earnings guidance,” Hurrell said.

More to come…

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