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Fonterra announcement awaited

NZ NewswireNZ Newswire 31/07/2016
The Fonterra head office in Fanshawe St, Auckland © Getty The Fonterra head office in Fanshawe St, Auckland

New Zealand dairy farmers are awaiting an update from their giant co-operative Fonterra.

Fonterra will make an announcement on Monday, a spokesman confirmed.

ASB economist Nathan Penny says it'll be an update of the forecast payout to farmers for the 2016/17 season, an earnings forecast and an update on the global dairy market.

The dairy co-operative is expected to make the announcement at 8.30am on Monday.

There is speculation Fonterra will cut its forecast payout but Mr Penny thinks the co-operative will stick to the current forecast of $NZ4.25 per kilogram of milk solids for the 2016/17 season.

He says it's early in the season and only 10 per cent of the volume for the whole season has been sold, global prices are mixed and production is flat to falling.

"Fonterra has stated that the main purpose of the announcement was to give an indication of its earnings for the new financial year, with the milk price forecast update tagged on. This indication hints that the milk price forecast may be unchanged," Mr Penny said.

D-day is looming though as milk volumes will peak in the next three months.

Current spot dairy prices extrapolated out for a whole season would suggest a cut in the forecast to as low at $NZ3.90/kgMS but ASB expects dairy prices will rise in coming months and is sticking to its forecast of a $NZ6.00/kgMS for the season.

When the 2016/17 season forecast was released it was a NZ35 cents per kilogram increase in the payout for the previous season of $NZ3.90 but was below the estimated break-even point for average farmers.

Fonterra has an annual turnover of $NZ35 billion a year and is the world's largest milk processor and the world's largest dairy exporter. It is responsible for 48 per cent of the world's whole milk powder exports and 41 per cent of butter exports.

Fonterra's new financial year starts on August 1.

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