The Fonterra Co-operative Group, New Zealand’s largest dairy company, has delivered an upbeat forecast in relation to both milk collections and earnings for the full fiscal year (FY) 2025.
According to its chief executive office, Miles Hurrell “good pasture growth across most of New Zealand to date has meant our forecast collections for the season are up”.
Hurrell is similarity upbeat in relation to the co-op’s forecast earnings for FY25.
“As we prepare our FY25 interim results for release on March 20, we can see we’ve maintained the momentum from Q1.
“The co-op’s earnings momentum is driven by strong demand across our sales channels.
Fonterra
Hurrell detailed that Fonterra’s earnings and the forecast farmgate milk price have “both benefitted from solid demand for our high value Ingredients products, and our sales book is well contracted for the season”.
According to the co-op its farmgate milk price sets the “benchmark” from which most other companies in New Zealand set their price.
The co-op’s latest update on its performance appears to have given its farmer shareholders something to look forward to.
Hurrell said that considering current factors it expects “to be in a position to pay a strong interim dividend”.
“Our revised dividend policy released in September 2024 is 60-80% of full year earnings, with up to 50% of full year dividend to be paid at interims,” he added.
New Zealand dairy farmers
A recent report by Rabobank highlighted that last year Oceania dairy farmers – including New Zealand – achieved the “lowest production costs”, outperforming other regions by a margin of 17% when adjusted for standardised milk composition and regional production costs in US dollars.
However, the availability of workers is a key challenge for both the Australian and New Zealand dairy industries with evidence suggesting, according to Rabobank, that the New Zealand industry is becoming “increasingly” reliant on migrant labour.
It is estimated that the New Zealand dairy industry has a shortage of 4,000 workers.
The Rabobank research also suggests that while dairy farmers worldwide are experiencing the “pressure of rising milk production costs”, producers in Australia and New Zealand faced increases of around 25%, while farmers in Ireland and Argentina saw cost hikes of 30% to 40%.
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