South Island dairy company Synlait Milk is forecasting a record payout to its suppliers on the back of strong global demand and expects prices to stay high for some time.
Dairy cows Photo: RNZ / Rebekah Parsons-King
The company, which is a major supplier to infant formula maker A2 Milk, has raised its forecast payout to $9.25 a kilo of milk solids from $8 a kilo.
"Dairy commodity prices have strengthened significantly as strong global demand has outrun restricted supply," chief executive Grant Watson said.
"As a result of this ongoing demand Synlait believe dairy commodity prices could remain high for some time as these dynamics will take time to unwind, supporting the record milk price forecast released today."
However, the pandemic was bringing pressures such as illness and lockdowns hitting production and supply chains.
"This has been amplified by rising production costs driven by strong inflation and ongoing pressure on our industry to decarbonise," Watson said.
He said prices were benefiting from the weaker New Zealand dollar, which had fallen more than 8 percent against the US dollar over the past three months.
Synlait's improved forecast matched that of Fonterra, which raised its forecast payout by 50 cents to a record range between $8.90 and $9.50 a kilo of milk solids.
Synlait is rebuilding itself after a shocking year in 2021 when it posted a record loss, but said it was renewing its strategy and is looking to return to robust profitability this year.