Fonterra increases forecast milk price for New Zealand

The co-operative’s after-tax profit for the 2015/16 financial year was $834 million. Sales fell 9 percent to $17.2 billion while cost of goods sold, which is primarily made up of New Zealand sourced cost of milk, fell about 13 percent to $13.6 billion.

“We are moving more milk into higher-returning consumer and food-service products while securing sustainable ingredients margins over the GlobalDairyTrade benchmarks, especially through speciality ingredients and service offerings”, said chairman John Wilson.

But he said the co-operative had responded.

Chairman John Wilson said the 2015/16 season had been incredibly hard for farmers, their families and rural communities, with global dairy prices at unsustainable levels.

“The money our farmers have invested in stainless steel is giving us more choice, and we have matched production to the highest value customer demand”, he said.

“There is still volatility in global dairy markets and we will continue to keep our forecast updated for our farmers over the coming months”.

New Zealand farmers need income of around $NZ5.05 a kilogram to break even, according to industry body DairyNZ – a level that hasn’t been achieved since the record $NZ8.40 milk price in the 2013-14 season.

However, the 0.2% fall for whole milk powder, New Zealand’s key export commodity, was a disappointment after the futures market indicated it would climb by up to 12%.

Fonterra chairman John Wilson said while there had been some improvement in the auction prices recently, the heightened strength of the New Zealand dollar against its United States counterpart was offsetting some of those gains.

Global dairy prices eked out a 1.7 per cent gain at the latest GlobalDairyTrade (GDT) auction, well short of market expectations of a 5 to 10 per cent increase.

The Zealand dollar, having pushed higher towards US73.60c on Tuesday night, fell on the back of the result, consolidating this morning at around US73.00c.