Fonterra chief predicts higher prices in 2013

Fonterra chief executive Theo Spierings says Fonterra’s strong balance sheet meant that from a cash flow point of view the co-operative was in a position to increase payments to farmers over the next few months without any significant risk to its financial stability. He also predicts an increase in forecast farmgate milk prices. “There has been a persistent, serious drought in the United States. That has pushed up the price of grain, which in turn affects dairy production. There are also concerns about drought in the Ukraine and Russia. In South America, extreme wetness in parts of Brazil and Argentina could also depress wheat production,” Spierings says. “Given current global conditions, our forecasting anticipates global dairy prices are likely to move higher in the first half of 2013.”

Meanwhile, the company has announced a revised payout forecast range for the 2012/13 season of NZ$5.90-$6.00 (€3.79-3.86) before retentions for a fully shared up farmer, 25 cents up on the previous forecast range.

Fonterra Chairman Sir Henry van der Heyden states, “The immediate effect of this decision is that our farmers will have more money flowing into their bank accounts from late January when they are paid for the previous month, and that will help them with their cashflows. Between 1 August and the most recent GlobalDairyTrade (GDT) trading event, prices have increased by an average 17.7 per cent. While there was a drop at last week’s GDT event, it has not changed our overall commodity price forecasts.”