Fonterra increases milk price and continues downsizing

This was reported by CEO Miles Hurrell in an explanation of the increase in the payout price. Barely a month and a half ago, Fonterra predicted a payout price somewhere between NZ $8,25 and NZ $9,75 per kilo of milksolids (combined fat and protein) for the current milk production season. This expected price has now been increased to NZ $9,00 to NZv$10,00 per kilo of milksolids. The mid-price has been increased by $0,50 from NZ $9,00 to NZ $9,50 and the margin of uncertainty has been reduced both upwards and downwards.

According to Hurrell, Fonterra also took heart from the recent GDT auctions when raising the forecast price.
Also, good note is taken of reports of a sharp decline in milk production in China. Fonterra does not mention any figures, but other sources report a 6% lower milk production for China in the third quarter of this year. No data is yet available for the fourth quarter. Chinese purchasing power has declined in the meantime. According to Hurrell, demand from other markets in Asia and Africa is also good.

In addition to a higher milk price, New Zealand farmers can still expect a dividend of 40 to 60 US cents per share.

Fonterra also announced that it is now really putting its consumer business up for sale. This involves well-known brands, such as Anchor and Mainland and 17 production locations in Australia, New Zealand, Sri Lanka and a number of other locations worldwide. Buyers can contact Fonterra, which itself has not yet named parties with which it is in talks. The sale is expected to yield between NZ $2,5 billion and NZ $3,5 billion.

The proceeds of the sale should largely benefit the shareholders, which mainly means the company's own farmers.