Milk money: Fonterra increases payout forecast and plans to pay farmers early

26 Aug 2024 --- Dairy cCo-operative Fonterra reveals a US$0.50 increase — up to US$8.50 per kgMS — of its forecast for the Farmgate Milk Price midpoint for 2024/25. At the same time, the company also upped its FY25 Advance Rate Schedule, advising that FY24 earnings will reach the top of the predicted US$0.60-0.70 per share.

According to Fonterra, this means that farmers will be paid earlier this season.

Fonterra’s CEO, Miles Hurrell, says the new forecast reflects the recent lift in global dairy trade (GDT) prices as well as the strength of the company’s balance sheet.

“Since announcing our opening FY25 season forecast Farmgate Milk Price in May, GDT prices have improved,” Hurrell explains. “We’ve reflected this in our revised forecast range, with our midpoint lifting 50 cents to US$8.50 per kgMS.”

“It’s still early in the season, with a relatively small proportion of our sales book contracted, so we are maintaining a wide forecast range. Our new forecast range is US$7.75-$9.25 per kgMS, up from US$7.25-$8.75 per kgMS. We’re also pleased to be announcing an uplift in our Advance Rate payment schedule, which will see farmers paid more for their milk earlier in the season.”

Finalizing FY24

Fonterra says it will confirm its final FY24 earnings and full-year dividend when it reports its financial results next month.

The news comes on the heels of several strategic moves enacted by the company. This includes a move to divest Oceania and its Sri Lankan business to increase its focus on dairy ingredients and a recent partnership with Superbrewed Food to advance sustainable food technologies.

“Our balance sheet strength has allowed us to make several enhancements to the Advance Rate schedule over the last two seasons,” says Hurrell. “The adjustments announced today will see farmers paid 10% more of the FY25 forecast Farmgate Milk Price from December paid January compared to other seasons, assisting farmers with on-farm cash flow.”

“As we look to close out the books for the year, it’s become clear that we have maintained strong performance across FY24. We’re indicating we expect our earnings to be at the top end of our forecast range and this puts us on track for a strong full-year dividend.”

This feature is provided by Nutrition Insight’s sister website, Food Ingredients First.

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