Fonterra lifts farmgate milk forecast
Dairy farmers should be more confident on increased forecast milk prices but Fonterra chief executive Theo Spierings warns it is not all rosy yet.
The dairy giant yesterday lifted its forecast milk price for the current season by 15 cents to $6.15 per kilogram of milksolids.
At the same time, it forecasted an opening price of $6.50/kg MS for the 2017-18 season.
‘‘World dairy prices have risen in recent months and as we near the end of the season we have more visibility and certainty which makes us confident of our $6.15 position,’’ Fonterra chairman John Wilson said.
ASB said the forecast suggested Fonterra saw relatively bullish prospects for the upcoming season.
Most dairy farmers would be setting up for a season in the black, the bank said.
‘‘The opening season forecast is likely to lead to an increase in farmer confidence and bring forward some farm spending and investment.’’
Waikato Federated Farmers president Andrew McGiven said it was great news for farmers and for the economy and showed a strengthening world market.
The opening forecast should give farmers a lot of confidence going into the season, he said, but he hoped farmers would use the extra cash to pay off debt accumulated over the past two seasons of low milk prices.
‘‘Two years of low payout has put people back four to five years, especially with debt servicing and repair and maintenance on farm machinery.’’
Spierings said the forecast was a balanced view of the world, rather than being bullish.
Stronger production in March and April had partly offset lower peak production, meaning collections were now only expected to be down 3 per cent for the season, rather than the forecast 7 per cent drop.
Spierings said he expected local production would see growth of about 2 per cent to 3 per cent over the next year.
Fonterra confirmed its earnings per share forecast range of 45 cents to 55c and said it still targeted a full-year dividend of 40c a share.