Milk prices received in Uruguay have increased 25 per cent since December.
Rising world milk prices mean newly listed PGG Wrightson offshoot NZ Farming Systems Uruguay (NZFSU) expects to beat forecasts of annual profit of US$1 million ($1.2 million).
NZFSU, which listed in December 2007, forecast annual net profit from operations of about US$1.5 million ($1.9 million), including a performance
fee payable to PGG Wrightson.
The previous forecast excluded the performance fee. Milk prices received in Uruguay were 25 per cent higher than in December - equivalent to $7.35 per kg of milk solids - and the market continued to favour producers, said NZFSU chairman Keith Smith.
That price compared with Fonterra's recently increased payout for the 2007-2008 season to a record $7.30 per kg of milk solids.
At listing, NZFSU had expected the equivalent of $5.10 per kg of milk solids for 2008/09, or US26c per litre.
The price was seen settling around US30c per litre, Smith said.
"The increased milk price and the company's accelerated development programme have outweighed the revenue impact of poor winter and spring weather on production per cow. The higher revenue will be offset to an extent by increased costs, including animal feed," Smith said.
A weak US dollar and limited supply meant milk prices were likely to remain near record levels in the next 18 months.
The company's milk production and farm development programme were in line with prospectus forecasts, with 10 cowsheds to be in operation by the end of April, milking 4300 cows.
NZFSU planned to be milking on average 13,000 cows through 20 cowsheds, on 12,000 hectares, in 2008-2009. Milk production would rise up to five times, to around five million kg of milk solids. Peak operation would be reached by 2010-2011.
NZFSU, which is converting land in Uruguay to intensive New Zealand-style dairy farms, posted a first half net loss of US$6.8 million as expected due to the performance fee payable to PGG Wrightson.
Shares in NZFSU closed up a cent at $1.40.
- NZPA
