{"id":42526,"date":"2021-02-05T00:00:00","date_gmt":"2021-02-04T11:00:00","guid":{"rendered":"https:\/\/www.farmersweekly.co.nz\/fonterra-lifts-payout-forecast\/"},"modified":"2021-02-05T00:00:00","modified_gmt":"2021-02-04T11:00:00","slug":"fonterra-lifts-payout-forecast","status":"publish","type":"post","link":"https:\/\/www.farmersweekly.co.nz\/news\/fonterra-lifts-payout-forecast\/","title":{"rendered":"Fonterra lifts payout forecast"},"content":{"rendered":"Reading Time: <\/span> 3<\/span> minutes<\/span><\/span>

The lift pushed up the forecast\u2019s midpoint range to $7.20\/kg MS.<\/p>\n

The lift coincided with the sixth consecutive price lift in the Global Dairy Trade (GDT) auction where milk prices were up 1.8%.<\/p>\n

Fonterra chief executive Miles Hurrell says the revision was the result of strong demand for dairy since it last updated its forecast in December.<\/p>\n

\u201cIn particular, we\u2019ve seen strong demand from China and South-East Asia for whole milk powder (WMP) and skim milk powder (SMP), which are key drivers of the milk price,\u201d Hurrell said.<\/p>\n

\u201cThis lift in our forecast farm gate milk price is good news for New Zealand farmers. It would see the co-op contribute almost $11 billion to the NZ economy through milk price payments this year, which helps support the wellbeing of rural communities,\u201d he said.<\/p>\n

Chief financial officer Marc Rivers says that demand from Asia had continued throughout the season and it was extremely encouraging.<\/p>\n

For China that demand in part was due to its ability to effectively manage the covid-19 pandemic.<\/p>\n

\u201cMaybe some of the effects of covid have been to change the mix of products, which is a core strength of Fonterra. We have the manufacturing network that allows us to adapt the portfolio based on those demand signals,\u201d River said.<\/p>\n

Those products are WMP, SMP and butter.<\/p>\n

Rivers says the forecast lift reflected in the co-op\u2019s confidence in the rest of the season.<\/p>\n

\u201cThere\u2019s still a lot more of the season to go and I think the things we need to keep our eyes on are the continued strong demand, which is very encouraging,\u201d he said.<\/p>\n

The flip side to the equation is supply, with Northern Hemisphere producers coming into spring and the United States in particular increasing its production.<\/p>\n

\u201cThat could temper things a little bit,\u201d he said.<\/p>\n

Hurrell says the impact of any changes in global market dynamics had reduced and their view of the season had firmed up now that the peak of the 2021 milking season has passed.<\/p>\n

\u201cHowever, we are continuing to keep a close eye on a number of factors. These include NZ weather conditions, expected challenges from further waves of covid-19 and increasing milk production in the Northern Hemisphere,\u201d\u00a0 Hurrell said.<\/p>\n

Rivers says the co-operative\u2019s expectations around production had remained unchanged.<\/p>\n

\u201cIt\u2019s more or less in line with last season, but we\u2019re watching the weather closely,\u201d he said, adding that the big question will be whether that demand will hold.<\/p>\n

Westpac senior agri-economist Nathan Penny says the lift was no surprise after the bank lifted its own forecast to $7.50\/kg MS in January.<\/p>\n

\u201cWe expect Fonterra to revise further later down the track,\u201d Penny said.<\/p>\n

China was effectively covid-free and its economy had surged at the end of 2020 with demand flowing through all sectors of its economy.<\/p>\n

For dairy, it is not just the staple items but premium items that were in demand. This was reflected in the strength of products such as butter and anhydrous milk fat (AMF) that were used in the food service industry.<\/p>\n

\u201cThose prices have come back with a vengeance,\u201d Penny said.<\/p>\n

\u201cThat indicates to us that Chinese households and South-East Asian households are confident enough to go out to eat at restaurants, they\u2019re back at bakeries and their demand for cream and butter is back to normal.\u201d<\/p>\n

He expected prices to stay firm over the short-term before easing off in the new dairy season.<\/p>\n

\u201cFarmers are in a sweet spot. Milk price is looking firm, if not strong, they\u2019ve had a good growing season compared to last season,\u201d he said.\u00a0<\/p>\n

\u201cThere\u2019s a chance things may dry out but given the amount of feed they have got on hand, I think they\u2019ll be reasonably happy in general on how they are placed to see out the rest of the season.\u201d<\/p>\n

Fonterra will provide more detail on its overall performance and full year earnings guidance when it announces its 2021 half year results on March 17.<\/p>\n","protected":false},"excerpt":{"rendered":"Booming demand for dairy from Asia has seen Fonterra lift its 2020-21 milk price forecast from $6.70-$7.30 to $6.90-$7.50\/kg MS.\n","protected":false},"author":20,"featured_media":36290,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[3],"tags":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t