"If we landed on an $8.40 midpoint that's going to equal the highest Farmgate Milk Price ever paid to our farmers by the co-op."
Local economies Fonterra operated in would also benefit, as almost $13 billion flowed into regional New Zealand through milk price payments this season alone.
While the increase in the milk price put pressure on Fonterra's input costs, the co-op remained comfortable with its current 2021/22 earnings guidance range of 25-40 cents per share, Cronin said.
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There were a few driving factors behind the increase.
"On GDT, there's continued good demand from China, but it has eased off a little bit - but that's been supplemented by demand from other areas - especially South East Asia."
Another factor was overall global milk supply growth, which was forecast to track below-average levels. This was driven by a slowdown in US production due to the increased cost of feed, Cronin said.
"These supply and demand dynamics are supporting our pricing and our contract rate for this year's a little bit higher than it usually is, so that's allowing us to narrow the range."
It was still early in the season and a lot could change, including increased volatility when prices were high, which was why Fonterra maintained a plus or minus 50 cents forecast range, Cronin explained.
The co-op also kept a close eye on anything that could impact demand, such as Covid-19, inflation, volatility in exchange rates, New Zealand weather conditions, and the potential impact of any geopolitical issues, he said.
Meanwhile, it's currently a busy time on-farm and at Fonterra's manufacturing sites.
It was the co-op's third season dealing with Covid-19 restrictions and there had been "a lot of extra work from a whole lot of people" to keep things running smoothly, Cronin said.
"One thing we know when the milk's flowing is that cows need to be milked and that tanker's got to show up - and that's a real benefit of the co-op."
