Fonterra Revises Milk Price Payout Forecast for 2011/12 Season

October 27, 2011 02:08 PM

Lower farmgate milk price forecast reflected a continued softness in commodity prices and a stronger New Zealand dollar.

Source: Fonterra
New Zealand’s Fonterra, the world’s largest milk processor, has announced a revised payout forecast for the 2011/12 season of $6.70-$6.80 for a fully shared up farmer, 45 cents lower than the opening payout forecast announced in May.
The revised forecast comprises a lower Fonterra farmgate milk price of $6.30 per kg milk solids, down from $6.75. The season's Distributable Profit range forecast of 40-50 cents per share remains unchanged.
Fonterra Chairman Sir Henry van der Heyden said the lower farmgate milk price forecast reflected a continued softness in commodity prices and a stronger New Zealand dollar.
"This softness of commodity prices has been reflected on Fonterra's online trading platform Global Dairy Trade (GDT), which has experienced eight successive price falls and one uptick since May", said Sir Henry.
Overall, the GDT-Trade Weighted Index is down 15.7% since May 3 when the opening forecast of $6.75 per kgMS was announced.
Coupled with ongoing foreign exchange volatility and overall global economic uncertainty, the Board had revised down the Fonterra farmgate milk price forecast.
Sir Henry said the opening forecast had anticipated an initial softening of international dairy prices, followed by a recovery.
"We aren't yet seeing the recovery of international dairy prices we initially anticipated and we are also dealing with a much stronger New Zealand dollar. Higher prices often lead to increased supply into global markets from our global competitors, as well as reduced demand. We are seeing this and it is impacting prices."
Sir Henry said the Board was committed to providing the best available information to farmer shareholders on a timely basis so they can plan accordingly. The forecast revision acted as a reminder to farmers to take a conservative approach with their farm budgets.
On the positive side, Sir Henry said there had been a strong start to the season. A long stretch of favorable weather in New Zealand had boosted pasture growth and contributed to record milk flows across the main dairying regions.

Fonterra is a global leader in dairy nutrition, the preferred supplier of dairy ingredients to many of the world's leading food companies. Fonterra is also a market leader with its own consumer dairy brands in Australia/New Zealand, Asia/Africa, Middle East and Latin America.

The farmer-ownedFonterra is one of the largest investors in dairy based New Zealand co-operative is the largest processor of milk in the world, producing more than 2 million tonnes of dairy ingredients, value added dairy ingredients, specialty ingredients and consumer products every year. Drawing on generations of dairy expertise,research and innovation in the world. Its 16,000 staff work across the dairy spectrum from advising farmers on sustainable farming and milk production, to ensuring the company lives up to exacting quality standards and delivering every day on its customer promise in more than 100 markets around the world.

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