Fonterra lifts forecast 2018 farmgate milk price

Forecast 2018 farmgate milk price is now $6.75/kgMS.

Fonterra Cooperative Group lifted its forecast farmgate payout for the 2018 season and projected earnings per share in line with the previous season, saying global supply and demand were "rebalancing".

Fonterra lifted its forecast to $6.75 per kilogram of milk solids, from an earlier projection of $6.50/kgMS and up from $6.15/kgMS in the 2016/17 season. It also forecast earnings per share in a range of 45 to 55 cents, making the forecast total available payout to farmers in the 2017/2018 season $7.20 to $7.30, before retentions.

"We are seeing growing confidence on-farm across the country and, with global demand for dairy strengthening, the signs are for a good start to the season for our farmers and their rural communities although following a challenging period of very wet conditions for some of our farmers," said chairman John Wilson, in a statement to the NZX. The increase "reflects the ongoing rebalancing of supply and demand in global dairy markets."

Dairy product prices rose for the first time in three GlobalDairyTrade auctions last week, with the GDT price index gaining 0.2 percent to US$3,387. Whole milk powder, New Zealand's biggest commodity export, rose 3 percent to US$3,114 a tonne, having recovered from as low as $1,590/tonne in August 2015.

Units in the Fonterra Shareholders Fund last traded at $6 on the NZX, and have gained 6.4 percent in the past year, tracking just ahead of the NZX 50 Index.