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Fonterra Raises Milk Payout Forecast as 2015 Earnings Jump

Fonterra, the world’s largest dairy exporter, raised its forecast milk payout to New Zealand farmers more than economists expected and said full-year earnings increased.

The Auckland-based company will pay its 10,500 farmer suppliers NZ$4.60 ($2.88) a kilogram of milk solids in the current season ending 31 May, up from a previous estimate of NZ$3.85, it said in a statement Thursday. New Zealand milk production will fall at least five per cent from last season, Fonterra said.

Dairy prices have started to recover from a 12-year low after Fonterra reduced the amount it sells at auction on waning milk production. The increased payout is still close to half the record NZ$8.40 paid in 2013-14, reducing farm incomes, slowing economic growth and helping convince the central bank to cut interest rates.

Chairman John Wilson said “extremely challenging” trading conditions globally had affected all parts of the cooperative’s business. Fonterra is in the middle of a review that has resulted in 750 job losses to date.

“Current global prices are unsustainable,” Wilson said in a statement. “While there are signs that supply growth globally is easing, a lift in demand, which is needed for prices to continue to rise, is still to come.”

Bloomberg News, edited by ESM

 

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