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Fonterra lifts milk price forecast by 50c

NZ Newswire logoNZ Newswire 24/08/2016

Dairy giant Fonterra has raised its forecast for the farmgate milk price for 2016-17 by 50c per kilo of solids as global dairy supply slows.

Combining the expected $4.75/kg price with a forecast of 50c to 60c for earnings per share for 2017, farmers were looking at $5.25 to $5.35 before retentions, Fonterra said.

DairyNZ's current estimated break-even price is about $5.05 .

The announcement follows two positive GobalDairyTrade auctions that saw futures prices for dairy rise sharply.

Fonterra chairman John Wilson says global prices are still at "unrealistically low levels" but a rebalance of supply was taking place.

"Milk production is reducing in most dairying regions globally in response to low milk prices and this is bringing the world's milk supply and demand back into balance," he said.

"Milk production in the EU is now in decline and our New Zealand milk collection at this early stage is around 4 per cent lower for the year to date."

He said gains were also being offset by a strengthening of the Kiwi dollar against the greenback.

"We expect the dairy market to be volatile over the coming months and will continue to keep our forecast updated for our farmers as we move into the season."

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