Fonterra says milk production running ahead of forecast

Fonterra says production is running ahead of forecast. Photo / File

Fonterra said its milk production is running ahead of forecast.

The co-op's production forecast for this season stands at 1,550 million kg of milksolids, up 3 per cent from the previous season.

Interim chief executive Miles Hurrell said favourable growing conditions had boosted production but that the 3 per cent forecast still stood.

"It's still 3 per cent, but we will watch that very closely over the next three or four weeks," he said on NZME's The Country radio show.

Hurrell, commenting on last night's Global Dairy Trade auction, said the 4.2 per cent lift in the GDT price index was better than Fonterra had expected.

Fonterra's reference products performed strongly at the auction, with skim milk powder prices jumping 10.3 per cent, whole milk powder gaining 3 per cent and anhydrous
milk fat firming by 3.2 per cent.

Hurrell said hot weather in Europe was helping to drive up skim milk powder prices.

"We are starting to see the effects of that hot summer in Europe really play out now, with milk volumes slowing down, which has an impact," he said.

"We are seeing really good demand out of China, which is going to support it," he said.

"Europe was holding down a bit of skim milk powder stock, and most of that is exhausted now, so you are starting to see that play out through the shortage of supply," he said.

Rural lending specialist Rabobank said it was a strong auction, given China had already imported a significant volume of both whole milk powder and skim milk powder over the last two months of 2018.

"Continued good weather across much of the country has seen feed reserves aplenty and milk production volumes still strong," Rabobank said.

"While November 2018 milk collections saw modest year-on-year growth of 1 per cent, we anticipate stronger December 2018 growth given that the tail end of 2017 was hot and milk supply dipped," it said.

Last December, Fonterra downgraded its farm gate milk price forecast to a range of $6.00 to $6.30 per kg of milksolids, down from a previous forecast of $6.25-$6.50, citing global supply issues.

Fonterra's forecast earnings per share range is 25 to 35 cents per share for the current financial year.