UPDATED: Fonterra lowers NZ milk collection forecast for this season

(Note: this story has been updated to reflect an amended statement received from Fonterra  – the orginal statement said the dairy cooperatve expects to collect four percent less milk this season)

Cooperative Group expects to collect 3 percent less milk from its New Zealand suppliers this season than it did in the prior season as dry weather stunts grass growth and lowers milk production.

Auckland-based Fonterra revised its forecast for its New Zealand milk collection for the current 2017/18 season to 1,480 million kilograms of milk solids, down 3 percent from the 1,525 million kgMS it collected in the 2016/17 season, it said. In December it had forecast milk collection would be in line with the previous season.

Fonterra, the world's largest milk processor, said wet conditions experienced by farmers at the beginning of spring improved from late October and into November, but recent dry weather is continuing to impact soil moisture and pasture quality right across the country. Dry conditions are expected to continue, and even if the rain forecast for early in 2018 eventuates, it will not be enough to bring production back to previously anticipated levels, it said.

The price of whole milk powder rallied 4.2 percent to US$2,886 a tonne in the Global Dairy Trade auction overnight, after Fonterra said it has begun to take volumes of whole milk powder off the auction platform in response to the lower milk supply and will carefully manage sales on and off GDT for the rest of the season as a result of the current weather conditions.

Some 13,255 tonnes of whole milk powder was offered at the GDT auction, 19 percent less than at the previous GDT ahead of Christmas. Fonterra advised last week that it plans to reduce the volume of whole milk powder that it plans to sell on GDT in 2018 by 10,011 tonnes, or 1.6 percent, from its previous forecast.

Units in the Fonterra Shareholders Fund, which gives investors exposure to Fonterra's earnings, last traded at $6.41, having gained 6.8 percent over the past year.

(BusinessDesk)