Fonterra has confirmed its forecast payment for the 2011/12 season, which is expected to decline from 2011’s record payout as global commodity prices ease from their highs.
The operating season forecast is NZ$7.15 to NZ$7.25 before retentions, made up of a milk price of NZ$6.75 per kilogram of milk solids and distributable profit of 40 cents to 50 cents.
Today’s statement affirms the forecast range Fonterra gave in May.
The recent decline in food commodity prices “was largely anticipated” when Fonterra first gave its projections, chairman Henry van der Heyden said.
“In volatile economic and market conditions, we could face a range of factors that may affect the season’s milk price. But at this early stage of the season we see no reason to alter the forecast.”
Average prices of dairy products fell for a fifth straight sale at Fonterra’s latest online auction last month. The GDT-TWI Price Index fell 0.9% to US$3,660 a metric tonne, the lowest since December. Milk powder prices have declined 16% from their peak in March, based on the ANZ Commodity Price Index.
Surging dairy prices have underpinned New Zealand’s economic recovery, with government figures yesterday showing they helped push the country’s terms of trade to a 37-year high in the June quarter, prompting some economists to say the index may have peaked.
The previous 2010/11 payout forecast of NZ$8 to NZ$8.10 a kilogram includes NZ$7.50 a kilogram of milk solids and a distributable profit range of 50 cents to 60 cents. The final payment details will be confirmed when Fonterra releases its annual results later this month.