November 17, 2016 / 8:22 PM / a year ago

UPDATE 1-Fonterra lifts farmgate milk forecast to NZ$6 as global dairy prices recover

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WELLINGTON, Nov 18 (Reuters) - Dairy co-operative Fonterra said on Friday it was lifting its forecast farmgate milk payout to NZ$6 per kilogram of milk solids (kgMS) as falling milk production boosted global dairy prices.

Global dairy prices have risen more than 50 percent since July, prompting the New Zealand dairy giant to raise the forecast payout for the current season from a previously predicted NZ$5.25 kgMS.

Fonterra’s chairman John Wilson said tightened global milk supply and ongoing demand for dairy products had caused “a steady improvement” in global dairy prices, which was filtering through to their payout to farmers.

Forecast earnings per share for the 2017 year were NZ$0.50 to NZ$0.60, meaning farmers were likely to earn at least $6.50 kgMS in the current season.

Prices for dairy ingredients such as milk and butter have fallen sharply for more than two years, hit by a global oversupply and slowing demand from China, squeezing the finances of farmers and producers and pushing many towards consolidation in search of economies of scale.

The dairy giant forecast a farmgate milk payment to its Australian farmers of A$5.20 kgMS by the end of the season. Fonterra’s current payout to Australian farmers is A$5.10 kgMS. (Reporting by Charlotte Greenfield; Editing by Alexandra Hudson)

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