Fonterra Co-operative Group Ltd has announced an upward revision to its forecast Farmgate Milk Price for the 2023/24 season, signalling positive news for dairy farmers.
The midpoint of the forecast has been lifted by 30 cents to $7.80 per kgMS, a rise from the previous projection of $7.50 per kgMS.
The revised forecast range for the season now stands at $7.30-$8.30 per kgMS, up from the earlier range of $7.00 - $8.00 per kgMS.
According to Fonterra CEO Miles Hurrell, this increase in the Farmgate Milk Price is a result of five consecutive strong performances in the Global Dairy Trade (GDT) events.
"Recently, we’ve seen a lift in demand, primarily from the Middle East and South East Asia, for our reference commodity products and this has been reflected in GDT prices," Hurrell stated.
He further explained that overall GDT prices have surged by 10% since the last Farmgate Milk Price update in December, with whole milk powder prices witnessing an 11.5% increase during the same period.
Despite the positive outlook, Hurrell acknowledged the uncertainties posed by geopolitical instability and supply chain disruptions on demand from key importing regions. However, he expressed confidence in Fonterra's ability to navigate these challenges, citing the company's scale and diversification across markets as key strengths.
"We can navigate these dynamics thanks to our scale and our diversification across markets, which provides us with optionality. We are also well placed to continue to get the Co-op’s product to customers through our partnership with Kotahi," Hurrell reassured.
Fonterra has also maintained its forecast earnings guidance for FY24, with expectations set at 50-65 cents per share. This stability in earnings guidance underlines the company's confidence in its operational strategies and market positioning.
The announcement of the increased forecast Farmgate Milk Price has been met with optimism among dairy farmers, who view it as a positive development amidst ongoing market uncertainties. John Smith, a dairy farmer from Waikato, expressed his satisfaction with the news.
"It's reassuring to see Fonterra responding positively to market trends. This increase in milk price forecast will definitely provide some relief for farmers like me."
Overall, Fonterra's decision to raise the forecast Farmgate Milk Price reflects the company's commitment to supporting its dairy farmers and capitalising on favourable market conditions.
As the season progresses, stakeholders will closely monitor market dynamics and Fonterra's performance to gauge the impact on the dairy industry's outlook for the year ahead.