Fonterra has increased its forecast farmgate milk price following strong demand for dairy products.
Photo: 123rf
The Co-operative has narrowed and lifted the bottom end of the range to between $6.70 and $7.30 per kilogram of milk solids.
The midpoint has lifted from $6.80 to $7.
Fonterra chief executive Miles Hurrell said forecasts would see the co-op contributed around $10.5 billion to the New Zealand economy this year.
"China is continuing to recover well from Covid-19 and this is reflected in recent Global Dairy Trade auctions with strong demand from Chinese buyers, especially for Whole Milk Powder, which is a key driver of the milk price."
Prices rose 4.3 percent at the Global Dairy Trade auction earlier in the week, with the price for Whole Milk Powder up 5 percent.
"The impact of Covid-19 continues to play out globally, and we continue to have a watchful eye on the increasing northern hemisphere milk production and New Zealand dollar."
"However, we have contracted a good proportion of our sales book for this time of the season, which has given us the confidence to narrow and lift the bottom end of the forecast range."
Hurrell said the firm had a solid start to the financial year with total group underlying earnings of $250 million - up from $72m this time last year.
"Sales volumes are in line with the same period last year, which was before we felt the impact of Covid-19. This reflects strong demand for dairy and careful management of our supply chain.
"We've seen improvements right across our business, which has resulted in a 40 percent increase in our normalised earnings. There's been a couple of exceptions to this - Europe, which has been impacted by higher costs, and Africa, which has been impacted by lower volumes as we have shifted product to meet strong demand across Asia."