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Fonterra holds steady on $7-$7.60 milk price forecast

Fonterra has already signed deals with suppliers in China, which should offset the impact of the coronavirus and has enabled it to maintain its forecast farmgate milk price range at $7.00-7.60 per kilogram of milksolids. 

The dairy giant has also reaffirmed its forecast full-year underlying earnings guidance of 15-25 cents per share, and revised its forecast milk collections for the 2020 season down from 1530 million kgMS to 1515 million kgMS.

ASB analyst Nathan Penny described it as a “reassuring and comforting” announcement, considering the speculation around coronavirus.

Chief executive Miles Hurrell was bullish about the forecast. 

“The momentum we saw in the first three months of the financial year has continued, and as we approach the interim results our underlying earnings are tracking well. However, given the potential significant risks that could arise from coronavirus in the second half, we are taking a prudent approach and maintaining our full-year forecast earnings range. 

The price to farmers is projected to be the same, but production will fall.


The price to farmers is projected to be the same, but production will fall.

“The current situation is very fluid and uncertain. However, we have already contracted a high percentage of our 2020 financial year’s milk supply and this is helping us manage the impact of coronavirus,” Hurrell said.

While there had been a slow down in container processing at ports, products were continuing to be cleared by customs and quarantine officials.

Penny said what stood out to him was the confirmation that product was being cleared.

“That’s the important part, they’re getting their product in, it’s still being sold despite the issues. That’s what we suspected because Chinese buyers on the global dairy auctions have been active, albeit cautious.”

The ASB forecast is for $7.40. 

Because so many restaurants and food outlets had been closed, Fonterra’s food service sector had been adversely affected.

Milk collections were forecast to be down because of the dry conditions in Waikato and the north, and the extreme flooding in Southland.

Fonterra’s interim result will be announced on March 18.  

Source: Stuff

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