Fonterra revises milk collections prediction due to drought

Fonterra Co-Operative has reaffirmed the farmgate milk price range at $7.00–$7.60 per kgMS (kilogram milk solids) and has forecast full-year underlying earnings guidance of 15–25 cents per share. It has also revised its forecast milk collections for the 2020 season from 1530 million kgMS to 1515 million kgMS due to persistent drought conditions across New Zealand.

“We have recently seen a reduction in milk collections and our farmers are facing ongoing challenging weather. We’ll continue to work with them to ensure that if they need extra support that they are able to access it,” said Miles Hurrell, Fonterra CEO.

The company is also trying to manage the impact of coronavirus.

“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,” Hurrell said.

“Our Greater China team are working hard to keep our operations running as smoothly as possible. Without them this would not have been possible and I want to thank them for their efforts. There has been a slowdown in processing of containers at ports and we are managing the flow of our product into China carefully to avoid congestion. Currently, our product is continuing to be cleared by customs and quarantine officials. We will provide a further update on the impact of coronavirus on our business when we announce our interim result on 18 March,” Hurrell said.

The Dairy Industry Restructuring Act (DIRA) stipulates that Fonterra must update its forecast farmgate milk price as soon as practicable after 1 March 2020; the price is currently steady at $7.30 per kgMS.

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