Fonterra ups farmgate milk price forecast to $6.75/kg

Fonterra has upped its farmgate milk price forecast to $6.75/kg. Photo / Bloomberg

Fonterra has increased its farmgate milk price forecast for the 2017/8 to $6.75 per kilogram of milksolids from its previous forcast of $6.50/kg.

The co-operative - in its first earnigs guidance for the new financial year - announced a forecast earnings per share range of 45 to 55 cents, making the forecast total available payout to farmers in the 2017/2018 season $7.20 to $7.30, before retentions.

Fonterra said guidance on dividend payments would be provided as part of its next interim financial financial results.

Chairman John Wilson said the revised milk price forecast reflected the ongoing rebalancing of supply and demand in global dairy markets.

"We are seeing growing confidence on-farm across the country and, with global demand for dairy strengthening, the signs are for a good start to the season for our farmers and their rural communities although following a challenging period of very wet conditions for some of our farmers," Wilson said in a statement.

The increased farmgate milk price will be welcome news to farmers as they continue to invest in their businesses off the back of an improved 2016/2017 season, with the usual reminder to budget cautiously especially in the early part of the season," Wilson said.

Chief executive Theo Spierings said the co-operative is well-positioned to take advantage of improving demand for dairy nutrition across Fonterra's ingredients, consumer and foodservice markets.

"Increasing numbers of consumers in our global markets prefer dairy for their everyday source of nutrition, and that is converting into strong demand particularly in consumer and foodservice products," Spierings said.

Spierings said the forecasts were prudent given that it is still early in the season and the co-op was starting with very low levels of inventory.