Announcement on lift in Fonterra milk prices expected

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Fonterra is expected to lift its 2018-19 milk price towards the upper end of its current $6.30-$6.60 range in an announcement due today.

Economists were also picking the co-operative would set its opening forecast for the new 2019-20 season in a range of $6.50-$7.50.

Dairy markets had strengthened over the past six months on the back of improved returns for dairy commodities and a softer New Zealand dollar.

ANZ agriculture economist Susan Kilsby said Fonterra was on track to finalise its milk price for the 2018-19 season within its current forecast guidance range. ANZ's forecast for this season remained at $6.40.

Stronger returns were forecast for the 2019-20 season and ANZ's forecast remained at $7.30.

That assumed dairy commodity prices would hold near current levels for the remainder of the 2019 calendar year then ease slightly in the later part of the season.

Kilsby expected Fonterra would forecast a milk price range, rather than a single figure, for next season.

"This approach is designed to give its suppliers a more reliable indication of the risk involved in the forecast.

"A range of at least $1kg MS would be required to provide a reasonable degree of certainty that the final milk price figure will fall within this range," she said.

While it was early days, Westpac senior economist Anne Boniface said if the bank's $7.20 forecast was in the right ballpark, the 2019-20 season would shape up as a good one for farmers.

ASB had pencilled in $6.60 for the current season and set its 2019-20 forecast at $7.