Fonterra chief executive Miles Hurrell says the lift is good news for both farmers and New Zealand communities, with the new mid-point contributing $13.8 billion to the New Zealand economy this season.
Fonterra has raised its 2021-22 forecast farmgate milk price range to $8.90-9.50/kgMS, up from $8.40-9.00.
The $9.20 mid-point is a 50c increase on its last forecast.
Chief executive Miles Hurrell says the lift is good news for both farmers and New Zealand communities, with the new mid-point contributing $13.8 billion to the New Zealand economy this season.
“The increase is the result of consistent demand for dairy at a time of constrained global milk supply.
“In general, demand globally remains strong – although, we are seeing this vary across our geographic spread. Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs.
“It’s a similar supply picture in New Zealand. Earlier this month we reduced our forecast milk collections for 2021-22 from 1525 million kg MS to 1500 million kg MS due to varied weather and challenging growing conditions.
He says the higher price will put pressure on margins in the consumer and foodservice businesses, but prices in our ingredients business are favourable for milk price and earnings at this stage.
“As a result, we remain comfortable with our current 2021-22 earnings guidance of 25-35 cents per share.”
Hurrell says there are a number of factors the co-op is keeping a close eye on, including growing inflationary pressures impacting on operational costs, the increased potential for volatility as a result of high dairy prices and economic disruptions from covid-19, particularly as governments respond to the rapid spread of the omicron variant.
