July 28 (BusinessDesk) – Fonterra Cooperative Group has once again lifted the amount it will pay its Australian suppliers on the back of an improvement in its business across the Tasman and rising milk prices.
Fonterra Australia lifted its average milk price for the 2017/18 dairy season by 20 Australian cents to A$5.50 per kilogram of milk solids. The increase will apply from July 1 and will be paid on Aug. 15, it said.
It also forecast its closing milk price for its Australian suppliers would be A$5.50-to-A$5.80 per kilogram of milk solids in the 2017/18 season as well as an additional payment of 40 Australian cents/kgMS. In May it forecast a range of A$5.30-to-A$5.70 per kilogram of milk solids.
Fonterra Australia managing director Rene Dedoncker said that improved market conditions and the strength of the Australian business supported this step up. “Since the start of this season our milk pool has grown, and our assets are nearing optimal capacity,” said Dedoncker.
However, the company noted that while commodity prices are strong, the rally in the Australian dollar was likely to influence the end of season milk price within that forecast range.
“We continue to monitor currency movements closely and will keep our farmers updated throughout the season with the latest market conditions,” said Dedoncker.
The move comes after it lifted its forecast payout for its New Zealand farmer shareholders to $6.75 per kilogram of milk solids, from an earlier projection of $6.50/kgMS and up from $6.15/kgMS in the 2016/17 season. It also forecast earnings per share in a range of 45 to 55 cents, making the forecast total available payout to New Zealand farmers in the 2017/2018 season $7.20 to $7.30, before retentions.
Units in the Fonterra Shareholders Fund closed at $6.05 on the NZX, and have gained 12 percent over the past 12 months.