Dairy turnaround: World's largest milk processor increases milk price
Fonterra the world's largest dairy processor today increased its 2016/17 forecast Farmgate Milk Price by 75 cents to $6.00 per kgMS.
It comes following a turnaround in the fortunes of the dairy market in recent months with a number of significant increases at the important Global Dairy Trade auction.
Just this week the majority of Irish milk processors also increased farmgate prices by between 1c/L and 2c/L.
Fonterra Chairman John Wilson said the increase reflects improvements in pricing since September, following the gradual rebalancing of global supply and demand.
“We’ve seen falling production in the major exporting regions, particularly Europe and Australia, and an unprecedented decline in New Zealand milk supply due to wetter than normal spring conditions across most regions. On balance, demand continues to be firm. As a result there has been a steady improvement in global dairy commodity prices and this is reflected in the improved forecast.
“We are very mindful that farm incomes will be affected this year because of lower milk production so we will be doing everything possible to build on our good start to the financial year and deliver the highest possible total payout to our farmers,” said Mr Wilson.
Fonterra’s first quarter revenue of $3.8 billion is up six per cent on the same period last year. Sales volumes are up two per cent to 4.9 billion litres liquid milk equivalent (LME), while the gross margin of 22 per cent remains largely unchanged.
Chief Executive Theo Spierings said the first quarter revenue gains reflected broad-based volume and margin growth across the business, and an ongoing focus on cost controls.