Revised Fonterra forecast milk price for 2014/15 season

Fonterra Co-operative Group Limited has reduced its forecast Farmegate Milk Price for the 2014/15 season from $5.30 per kgMS to $4.70 per kgMS. This amounts to a forecast cash payout of $4.95-$5.05 for the current season when combined with the estimated dividend range of 25-35 cents per share.
According to chairman John Wilson, although expected the revision will put pressure on their farming business budgets.

“There is still considerable volatility in global dairy markets,” said Mr Wilson. “Right now we are seeing a number of factors that are delaying a sustained return to higher global prices.”

Globally the supply of milk is greater than demand, which has lead to a 16.9 per cent drop in GlobalDairyTrade prices since late September. Skim Milk Powder prices have fallen 7.7 per cent.

“Falling oil prices, geopolitical uncertainty in Russia and Ukraine, and subdued demand from China as it continues to work through inventory are all contributing to ongoing volatility and weak demand,” Mr Wilson said. “Today’s revised forecast reflects the Board and management’s best estimates at this time. Given the uncertainty we are advising farmers to continue to be cautious with budgeting and we will update them as the season progresses.”

The Board expects to look at the estimated dividend range at the time it announces its Interim Result.

Fonterra considers its forecast Farmgate Milk Price every quarter as required by the Dairy Industry Restructuring Act (DIRA).

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