Fonterra expected to offer prudent 2017-18 forecast

fonterra-expected-to-offer-prudent-2017-18-forecast

Most analysts are picking Fonterra will announce a cautious opening payout forecast for the 2017-18 season of about $6 per kilogram of milksolids after its board meeting this Wednesday.

The exact timing of the announcement is uncertain but it is likely to be Thursday. Fonterra said it could not divulge the date because of NZ Stock Exchange rules.

Federated Farmers dairy group chairman Andrew Hoggard said Open Country Dairy’s opening forecast of $6.25-$6.55/kg MS might influence decision making.

Most analysts are picking Fonterra will announce a cautious opening payout forecast for the 2017-18 season of about $6 per kilogram of milksolids after its board meeting this Wednesday.

The exact timing of the announcement is uncertain but it is likely to be Thursday. Fonterra said it could not divulge the date because of NZ Stock Exchange rules.

Federated Farmers dairy group chairman Andrew Hoggard said Open Country Dairy’s opening forecast of $6.25-$6.55/kg MS might influence decision making.

“My gut feeling is that they will be close to OCD. There’s a bit of competition happening with OCD opening a new plant in the Waikato and OCD announced their forecast much earlier than anyone else,” Hoggard said.

On the other hand, it was always easier politically to lift prices rather than lower them, which could point to a lower starting bid by Fonterra.

While bank economists are predicting a prudent opener, there is a wide range of end-of-season prices.

The ASB’s Nathan Penny tips the final price could go up to $6.75.

He said global dairy levels were now in balance after a period of high production which had pushed prices down.

But Penny noted that in recent years the difference between the opening and final price had been on average “plus or minus $1.50”.

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BNZ economist Doug Steel said the bank was not putting out an opening number, but it believed the end-of-season price would be $6.

“We are sceptical that these present prices will hang around, because there is potential for higher production brought on by higher prices, and that will push prices lower.”

However, assuming prices remained as they were, the final payout might go as high as $7, Steel said.

On the back of a fifth consecutive rise in world dairy prices at the May 16 GlobalDairyTrade auction, ANZ and Westpac lifted their final forecast payouts for the 2017-18 season.

ANZ chief economist Cameron Bagrie and Westpac economist Sarah Drought both said a combination of rising dairy prices and a weaker Kiwi dollar had led to their improved forecasts.

Prices at the auction were up by 3.2 per cent, prompting the ANZ to predict a 75c increase on this season’s $6/kg milk price. Westpac also revised its 2017-18 season-end forecast to $6.50/kg MS.

ANZ chief economist Cameron Bagrie and Westpac economist Sarah Drought both said a combination of rising dairy prices and a weaker Kiwi dollar had led to their improved forecasts.

“While we still expect global prices to ease back this year, the foundations are there for a step-up in the farmgate milk price,” Drought said.

“That includes a lower NZ dollar, which has been lingering at 68-69 cents over the past couple of months.”

AgriHQ said strong demand for fat products was the driving factor behind the lift.

Asian consumers have developed a taste for cakes and cream and their collective sweet tooth could push up the forecast price, while some poorer nations are also developing a taste for butter, driving up demand.

The world remains short of milkfat products and New Zealand is the largest supplier of globally traded butter and anhydrous milkfat (AMF), both of which performed strongly in the auction.

Price indexes for butter lifted 11.2 per cent and (AMF) rose 8.2 per cent. Prices have been moving up all season and show no signs of slowing down.

The previous auction on May 2 saw the fourth straight rise in prices, up 3.6 per cent as farmers geared up for winter.

New Zealand’s major export commodity, whole milk powder, was up 1.3 per cent to US$3312 (NZ$4807) a metric tonne.

 
Source: Stuff

Link: http://www.stuff.co.nz/business/farming/92833475/fonterra-expected-to-offer-prudent-201718-forecast

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