Fonterra Co-operative Group has today (Thursday, December 7) increased its forecast farmgate milk price and earnings guidance for 2024.
The forecast farmgate milk price midpoint for the 2023/24 season is up 25 cents to NZ$7.50 (€4.26) per per kilogram of milk solids (MS), with the forecast range moving from NZ$6.50-$8.00/kgMS to NZ$7.00-$8.00 (€4-€4.50)/kgMS.
The chief executive of New Zealand’s largest dairy company, Miles Hurrell said that the revised forecast reflects recent strengthening in demand for products from key importing regions, including improvement in demand from China during the first quarter.
“Global Dairy Trade (GDT) prices have lifted, and our sales book is also well contracted for this time of year, giving us confidence to increase our forecast farmgate milk price.
“It’s still early in the year, with potential for further volatility in commodity prices, so we will continue to watch market dynamics closely and provide updates as needed,” he said.
Fonterra
Fonterra has also reported strong earnings for the first quarter due to improved performance in all three of its sales channels.
“As a result, we have lifted the midpoint of our forecast earnings for the year up 5 cents per share, with the range moving from 45-60 cents per share to 50-65 cents per share,” Hurrell said.
Fonterra’s profit after tax is up 85% on this time last year to NZ$392 million.
The co-op said that these earnings are from continuing operations and exclude the performance and impact of selling he Dairy Partners Americas (DPA) joint venture with Nestlé in Brazil.
The lift in earnings has been driven by higher margins across the co-op’s ingredients, foodservice and consumer channels.
“Looking ahead, we expect these higher margins to continue throughout the first half of the year, before tightening across all three sales channels in the second half of the year, due to higher input costs and the gap between reference and non-reference product prices narrowing.
“Our increased forecast earnings guidance of 50-65 cents per share reflects this and we are on track for a strong interim dividend,” Hurrell said.