Fonterra hikes milk forecast 60 cts, beating expectations

Fonterra hikes milk forecast 60 cts, beating expectations

By Paul McBeth

Feb. 22 (BusinessDesk) – Fonterra Cooperative Group, the world’s biggest dairy exporter, lifted its forecast pay-out to farmers by 60 cents, beating expectations and bringing the total payment to as much as $8 a kilogram of milk solids.

The dairy cooperative expects to pay $7.50 per kilogram of milksolids this season, and has kept its distributable profit range of between 40 cents and 50 cents a share. It reduced the target dividend range to between 25 cents and 30 cents from a range of 25 cents to 35 cents previously. Economists expected the board to raise its forecast at today’s meeting, though 50 cents per kg/ms was the top of their expectations.

“The significant milk price increase is welcome news indeed for Fonterra farmers, many of whose farm businesses remain under pressure after several challenging years and a current season marked by some difficult weather conditions,” chairman Henry van der Heyden said in a statement. “It’s also good news for the New Zealand economy, and underlines the importance of dairying to New Zealand’s ongoing prosperity.”

The announcement comes as Christchurch was struck by a 6.3 magnitude earthquake, just five months after the 7.3 quake caused more than $5 billion worth of damage to the region. That drove down the kiwi dollar, which otherwise would be expected to gain on Fonterra’s payout news.

Fonterra chief executive Andrew Ferrier said strong dairy prices were being driven by solid demand in China and other Asian markets and tighter lines of supply amid poor weather around the world. Fonterra expects global milk production grew at a 1.8% pace last calendar year, slowing from the 2% growth in 2009.

The exporter kept its forecast profit at a range of between $550 million and $690 million for the 2011 financial year.

The pay-out comes after Fonterra put a domestic price freeze on local consumer prices, and will continue to absorb costs for the coming months.

(BusinessDesk)

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