Fonterra has increased its forecast milk price for the 2010/11 season from $6.60 to $6.90 per kilogram of milksolids (kgMS) while keeping forecast dividends unchanged at 40-50 cents a share.This means farmers will receive the equivalent total payout of $7
Fonterra has increased its forecast milk price for the 2010/11 season from $6.60 to $6.90 per kilogram of milksolids (kgMS) while keeping forecast dividends unchanged at 40-50 cents a share.
This means farmers will receive the equivalent total payout of $7.15-7.25 per kgMS after retentions.
The dairy giant also announced its estimated fair value share price for the next season is $4.52, which is the same as the current season’s price.
The increase is good news not just for farmers but for the wider economy also, as a recent report highlighted.
The NZIER report showed every $1 rise in Fonterra’s payout adds about $590 million to the country’s gross domestic product, or $270 for every New Zealander.
Last season Fonterra shareholder farmers received a total of $7.5 billion for their milk.
Chairman Sir Henry van der Heyden said the decision to raise the forecast milk price reflected the continuation of high international dairy prices further into the 2010/11 season.
Chief executive Andrew Ferrier said global markets for key dairy ingredients remained finely balanced, with solid demand being underpinned by some growth in supply out of the northern hemisphere.
“International dairy market prices have generally held up better than initially expected when we made the opening forecast back in late May. Offsetting this good news has been a stronger New Zealand dollar which is eroding the value of dairy export returns for our farmers,” Mr Ferrier said.
“We had a solid result at the 1 December globalDairyTradeTM trading event, with average prices 1.5% above the 2 November event. This has added to our confidence in the season’s outlook.”
Fonterra was reviewing the potential impact of the recent dry conditions around New Zealand on anticipated production levels, and would update the Board in due course.
Sir Henry said that while farmers would no doubt welcome news of a higher forecast milk price, they were potentially facing much higher input costs if current dry weather continued.
“It is still early in the season, and some good falls of rain could help a lot, but milk production in the North Island is declining and we know farmers in some regions are struggling,” said Sir Henry.
