Fonterra has increased its forecast farmgate milk price for the current dairy season, sighting strong demand for the co-op's milk.
Fonterra forecasts payout will drop by up to 50 cents a kg Photo: RNZ / YouTube
The dairy giant now expects to pay farmers between $6.55 - $7.55 per kg of milk solids. That is up 30 cents a kg from its previous forecast range of $6.25 - $7.25.
Fonterra chair John Monaghan said the co-op had been achieving good prices for its milk so far this season.
"Demand for whole milk powder (WMP) has been firm, and for the full season we're expecting it to be above last year. Global WMP production is down year to date and expected to continue to decrease for the remainder of 2019.
"We are also continuing to sell our skim milk powder at higher prices than EU and US dairy companies in Global Dairy Trade (GDT) events," Mr Monaghan said.
Fonterra chief executive Miles Hurrell said while there were positive signs for the milk price, it was still very early in the season and a lot could change.
There were a number of factors which the company was keeping a close eye on, which is why it had retained a wide forecast milk price range, he said.
"These factors include global trade tensions and political instability in some of our key sales regions. And, as is always the case, we cannot predict the weather and clearly weather conditions play a big role in global supply," he said.
Mr Hurrell said the strong demand for the Co-op's milk and the prices that were being achieved, relative to other milk-producing regions, demonstrated the rationale of Fonterra's new strategy to prioritise New Zealand milk.