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Fresh Produce

Fonterra Raises Farmgate Milk Price Forecast On Tight Supply

Fonterra has raised the forecast range for the price it pays farmers for milk in the 2021-22 season, citing a below-average increase in global supply and firm demand.

The New Zealand-based dairy giant said higher feed costs had slowed US production, dragging down global supply below-average levels.

Demand in key diary market China has eased in the past couple of months, but other regions have offset that decline, the company said.

In May, Fonterra said the coronavirus pandemic was 'like nothing we've experienced before' as it cut the price it pays farmers for milk for the upcoming season with demand crumbling due to virus-led restrictions.

Farmgate Milk Price

Fonterra raised the midpoint of its farmgate milk price range to NZ$8.4 per kilogram of milk solids (kgMS), 40 cents higher than before.

The overall range was increased to between NZ$7.90 and NZ$8.90 per kgMS, from NZ$7.25 to NZ$8.75 kgMS.

"It's still early in the season, a lot can change, and there can be increased volatility when prices are high," chief executive officer Miles Hurrell said in a statement.

"While the increase in milk price can put pressure on our input costs, we remain comfortable with our current 2021/22 earnings guidance range of 25-40 cents per share."

In June of this year, the dairy firm started a consultation process to seek farmers’ feedback on potential options to change its capital structure for greater financial flexibility.

News by Reuters, edited by ESM. For more Fresh Produce  news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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