Fonterra Cooperative Group has raised its forecast payout to farmers on rising Asian demand but has canned its interim dividend due to the increased cost.
The dairy processor now expects to pay $6.30-6.60 per kilogram of milk solids in the current season, up from its December forecast of $6-6.30/kgMS. It paid $6.69/kgMS in the 2018 season. Fonterra has also scaled back its milk collection forecast by 20 million kg to 1,530 million kgMS, which is still 2 per cent more than last season.
"Since our last milk price update in December, global demand has strengthened," chair John Monaghan said in a statement. "This is driven predominantly by stronger demand from Asia, including Greater China. The European Union's intervention stocks of skim milk powder have also now cleared for the season and, as a result, we expect demand for SMP to be strong."
The regulated Dairy Industry Restructuring Act price and advance rate have been set at $6.45/kgMS. The new forecast will see farmers paid $9.4-10.1 billion compared to $9.3-9.77 billion.
Monaghan said he expects demand to remain relatively strong for the rest of the season.