Fonterra lifts milk price forecast, plans special dividend

Fonterra has increased its milk price forecast and now plans a special dividend.

Fonterra has shifted the mid-point of its 2025-26 farmgate milk price forecast back to $9.50 per kg of milksolids from $9.00/kg because of recent improvements in commodities prices.

The co-op also advised it planned to pay a special dividend from the sale of its Mainland business, in a range of 14-18c a share, coming from the consumer business’ 2026 earnings under Fonterra’s ownership.

The farmgate milk price forecast range has narrowed from $8.50-$9.50/kg to $9.20-$9.80/kg.

Chief executive Miles Hurrell said Fonterra had been able to make changes based on recent improvements in global commodity prices combined with Fonterra’s well-contracted sales book.

Global Dairy Trade auction prices were weak towards the end of 2025 but have picked up strongly since then.

“Global milk production remains above seasonal norms, meaning the risk of further volatility in pricing remains,” Hurrell said.

“As such, we continue to take a balanced approach with our farmgate milk price forecast.“

Farmers on Thursday approved a $2/share capital repayment arising from the sale of Mainland to Lactalis.

“Fonterra is today advising that it intends to pay out 100% of underlying earnings generated by Mainland Group during 2026 while still under Fonterra ownership,” Hurrell said.

The earnings will be distributed through a special Mainland dividend payment to shareholders and unit holders following the completion of the sale to Lactalis.

“We are currently finalising our interim accounts and can indicate that we expect the special Mainland dividend to be in the range of 14-18 cents per share, which reflects the operating performance of the Mainland business during the first half of this year driven by ongoing cost management and favourable input commodity prices,” Hurrell said.

This remained subject to the settlement date of the transaction and the finalisation of its financial statements and audit process.

Fonterra’s 2026 forecast earnings guidance from continuing operations remains unchanged at 45-65 cents per share.

“Our interim dividend from continuing operations will be confirmed when we release our FY26 interim results and an update on the special Mainland dividend will be given at this time,” Hurrell said.

Fonterra expects the transaction to be complete in the first quarter of the 2026 calendar year, subject to separation of the businesses from Fonterra and remaining regulatory approvals being received.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.

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