Fonterra forecasts 3% rise in NZ milk collection this season

Fonterra Cooperative Group expects to collect 3 percent more milk from New Zealand farms this season as higher milk prices encourage farmers to lift production.

The country's dominant milk processor forecast its New Zealand milk collection for the current 2017/18 season would rise to 1,575 million kilograms of milk solids, from 1,526 million kgMS in the season ended on May 31, it said in its latest Global Dairy Update.

Fonterra expects a better season ahead for the dairy industry as the world's largest exporter of dairy products benefits from rising prices. Last month it set its initial forecast for milk payments to farmers for the 2017/18 season at $6.50/kgMS, up from its expected payout for the 2016/17 season of $6.15/kgMS. The cooperative said today that last season's New Zealand milk collection was impacted by wet conditions through spring, however more favourable weather conditions through summer lifted production but cooler conditions in May dented collections in the South Island.

"At this stage, collections are estimated to increase by 3 percent in 2017/18 assuming a return to more usual climatic conditions," Auckland-based Fonterra said in the update. "The improved milk price environment should provide support to farmers' milk production plans."

The cooperative noted that it was very early in the season to accurately forecast the total milk collection, and said it would continue to provide updates as the season progresses.

In Australia, Fonterra said it collected 116 million kgMS in the 11 months to May 31, which is 1 million kgMS higher than last season.

"Last year's production was heavily impacted by lower Australian milk prices," the cooperative said. "Favourable autumn conditions combined with lower key input costs have aided the season recovery in milk collection."

The cooperative noted that of the main dairy exporting countries, New Zealand's dairy export volumes lifted 4 percent in the 12 months to March, Australian volumes edged up 1 percent, and US volumes advanced 8 percent. In the European Union, export volumes for the 12 months to February lifted 4 percent.

China, the largest importer of dairy products, lifted its total dairy imports 10 percent in the 12 months to April. Its fluid and fresh dairy imports increased 13 percent, whole milk powder lifted 8 percent and whey powder advanced 12 percent.

In other Asian markets, dairy imports lifted 7 percent in the 12 months to February, while Latin American imports increased 11 percent, and imports in the Middle East and Africa slipped 3 percent.

Units in the Fonterra Shareholders Fund last traded at $5.94 on the NZX, and have gained 15 percent in the past year.

(BusinessDesk)