Westland, Synlait forecast higher milk prices after Fonterra hike

Westland Milk says butter will drive an improved payout in the 2018/19 season. Picture/Supplied.

A bullish outlook for butter prices has encouraged Westland Milk Products to pitch its farmer payout forecast at $6.75 to $7.20 per kg of milksolids for 2018/19, putting New Zealand's second biggest dairy-co-operative in the same price league as its competitors.

Hokitika-based Westland's 2018/19 forecast compares with $7.00/kg for Fonterra and Synlait Milk, but the co-op's forecast for the current season - which ends on June 11 - is lower at $6.10 to $6.30/kg - due in part to the effects of former-tropical cyclone Fehi which hit the West Coast in February.

Canterbury-based Synlait's forecast for 2017/18 sits at $6.78 while Fonterra's milk price - upgraded by 20c in May - is $6.75/kg.

Westland chairman Pete Morrison said the coming season's forecast was driven by an improved sales outlook.

"We are now seeing improved sales and a better sales outlook," he said. "There is a much improved performance from our infant and toddler nutrition and UHT plants and consumer butter has been, and we believe will continue to be, a star performer," he said in a statement.

Morrison said Westland was starting to see some payback on the capital investments made in its nutrition and UHT capacity over the last few years.

Westland has traditionally produced butter for export and in large packs for commercial sale in New Zealand but in 2016 it started selling consumer sized packs to New Zealand supermarkets.

Morrison said "Westgold" was out-selling all other gourmet butters in New Zealand combined, and was starting to reach sale levels comparative with more established brands.

Other factors influencing the increased payout prediction for 2018-19 included evidence that butter would also continue to be a good export earner.

Butter last traded on the GlobalDairyTrade platform at US$5787 a tonne, not far off last September's record of US$6026.

In its latest milk price update, Synlait managing director and chief executive John Penno said its opening forecast for 2018/19 was based on milk fat prices remaining firm throughout the season.

"We're positive about next season but, like us, farmers should remain cautious because small changes in market dynamics can have a major influence on milk price," Penno said.
-- Staff Reporter